If you have been saving up money for a down payment on a home, 2012 may be the best time to buy! Interest rates for real estate are at an all-time low and many people are able to cash in on the tremendous savings. Debating if you should buy a home in the middle of the year or to wait toward the end is up to you but keep in mind that the low interest rates for mortgages will not last forever. There are some things that you need to consider when you are back and forth on your decision to buy a home. Here are some tips that will help you know if you are ready to buy a home.
Chapter 1. What does your budget look like?
You need to know what you can afford. What does your debt to income ratio look like? This is an important thing to consider in order to know that you are buying a home that you can actually afford and to prevent you from becoming house poor. Remember to add in the extra costs to the mortgage amount like the homeowner’s insurance costs and the utilities. The best option is to purchase a home that is 33% of your gross income or less. This prevents you from spending too much money on a home.
Chapter 2. How does your credit compare?
Lenders do not want to take on a lot of risk. They are looking for people that have a low debt to income ratio. Keep your credit card debts lower and make sure you are avoiding excessive debt and spending. The best option you can have is to come with a very low debt ratio and a credit score that is above 760 or higher. This is a great way to show the lender you can afford the home and you are not a financial risk.
Chapter 3. Do you have a down payment?
There are many people that can afford to put down 20% on a new home. This is a great goal to look for but it’s not always one you can do. Look at your budget to see what you can save up and try to come with at least 10% along with an additional 3 to 5 percent for the closing costs. Bringing money to the table will end up saving you hundreds of dollars a month in a payment amount along with reducing the interest rate offered by the lender.