The American dream – owning your first home
Owning real estate is more than the largest investment most Americans will make; this is the essence of the american dream! Owning your own home is a great blessing. Therefore; Although home ownership usually requires commitment, discipline and consistent work, the effort is well worth it.
Before one even begins the epic search for a home, certain steps must be taken. First, understand personal finance. Recreate your personal monthly budget and find out exactly how much you can spend or how much you’re willing to spend on your monthly mortgage payment. Next, credit score companies are required by law to provide one free copy of the credit score per year to each individual consumer. Get a copy of your credit report because it will save time for all parties while the process continues. A third, easy suggestion would be to do a little online research on the simple jargon or jargon of the real estate world. The more one understands the terminology, the easier the process will be.
The first thing to consider when buying a home is your finances. In addition to establishing a budgetable monthly payment, getting pre-approved is an important first step. When a person gets pre-approved by a lending institution, the lender will effectively state how much money they are willing to lend. This will give the buyer a realistic view of which homes are eligible and will make the seller happy. Even without pre-approval, a loan will be requested and having a credit report will speed up this process. In life, almost everyone slips up at one time or another, so be prepared to explain each credit report strike and how the improvements were made.
Another financial principle concerns the monthly budget. Some well-established and time-tested standards set by Fannie May are great for strong guidelines. The total amount of the monthly installment on the mortgage loan must not exceed 28% of the gross monthly income. Total debt, including student loans, credit cards, car payments, etc., should not exceed 36% of an individual’s gross monthly income.
In addition to long-term monthly mortgage costs, there are several high closing costs to consider. A strong down payment will help reduce the interest rate and is highly recommended. Somewhere between 10-20% of the total cost of the home can and should be used as a down payment. Closing costs never seem to end, often costing between 3-8% of the home’s total price.
Finally, choosing the right type of mortgage is key. Typically, mortgages are fifteen or thirty year repayment mortgages and are either fixed rate or adjustable rate. Deciding which combination to use can usually be simplified to how long a person plans to keep their home and whether they want lower monthly payments with a higher interest rate or higher monthly payments with a lower interest rate. Thirty-year fixed-rate mortgages are the most popular. If the buyer plans to stay in the home for less than five years, an adjustable rate is probably preferable. If the buyer wants to put more money towards principal than interest than fifteen year mortgages are more preferred. In the most common case of a person who plans to live in their home for an extended period of time and wants to pay as little as possible each month on the mortgage, the thirty-year fixed rate mortgage is the answer.
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