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Is buying a home on the agenda for you in 2021? If so, there’s a little prep work that’s required.
Considering how expensive a home purchase can be, it makes sense to get all your finances in order and gather up the right team of professionals to ensure a seamless process and successful transaction.
Long before you book your first showing, you’ll want to make sure you’re in a strong financial position to make an offer on a home and apply for a mortgage. Doing your due diligence long before you start your search for a new home will boost the odds of coming out the other end a successful buyer.
If you’re a homebuyer, consider the following important financial fundamentals when buying a home.
Taking out a mortgage requires a down payment of some sort unless you qualify for a no-money-down VA loan. Otherwise, just about all other mortgage products require a little bit of money upfront.
The exact amount of money required will depend on a number of factors, including the type of mortgage you apply for, your credit score, and your financial profile. Regardless, a down payment usually translates into a few thousand dollars, so you’ll need to take some time to save up in order to ensure that you have a substantial amount to put towards a mortgage and a home purchase.
Having said that, you don’t necessarily have to come up with a huge chunk of the purchase price of the home. Contrary to common belief, your down payment could be substantially less than 20%. In fact, you may be able to put down as little as 3.5% of the purchase price of the home you are buying.
Regardless, you’d be prudent if you started saving now – you might be closer than you think. A great way to help you ensure that your saving efforts are maintained over the next little while is to automate your checking account to pull a portion of your paycheck into a separate house fund. That way you don’t even have to think about manually setting some money aside every week — it will just happen automatically. Before you know it, you’ll have a nice sum of money available to be used for a downpayment to buy a home in WA, CO, ID, or OR.
Your credit score is one element that helps determine which home loan you’ll qualify for in the application process. The higher your credit score, the better your odds of getting approved for a mortgage.
A good credit score also impacts your mortgage interest rate. Lenders look more favorably on borrowers with a better credit score, as it suggests that they are more responsible with their finances, including bill payments. A lower interest rate means you’ll pay a lot less over the life of your loan, so you definitely want to do what you can to secure a lower rate.
At the end of the day, a higher credit score could lead to a lower monthly payment. If your credit score is a little on the lower side right now, take some time to improve it. You can do this by staying on top of your loans, making sure to pay your credit card bills on time, keep your credit card spending to no more than 30% of your credit limit, and paying more than the minimum required payment on your credit cards.
Buying a home is not something you want to do on your own. Instead, you’ll want to be paired up with industry professionals who can guide you along the way. Real estate professionals help you make strong decisions throughout the homebuying process. They know the market and can guide you towards a sound investment.
Since real estate agents are typically paid by the seller, buyers don’t usually have to worry about having to pay their agents for their services. As such, it makes little sense not to enlist the help of an agent to help you buy a home in Seattle or Boise. Connect with a real estate professional to get started.
Before you start looking for homes on the market, make a call to your mortgage professional first to get pre-approved for a home loan. A pre-approval letter lets you know how much money you can borrow and helps you determine how much home you can afford. That way you can focus your attention only on properties that fit within your budget. This will avoid any time wasted and disappointment.
Getting pre-approved also shows sellers you’re a serious buyer. This is especially helpful in a competitive market where there are many other qualified buyers vying for the same properties in Denver and Portland. Sellers will feel more confident entertaining an offer from a buyer who has already shown their ability to potentially qualify for a mortgage.
Contact a loan officer, and if you don’t know who to call, your real estate agent should be able to provide a trusted referral.
Sammamish Mortgage is a local mortgage company serving the broader Pacific Northwest region, including Washington state, Idaho, Colorado, and Oregon. We have been offering a wide variety of mortgage programs and products with flexible qualification criteria since 1992. Please contact us if you have any questions or are ready to apply for a home loan.