Owning a new home is everyone’s dream. Of course, many find that home prices are way above their means. For those looking for their dream home in Prince George’s County, you should get prepared for the grueling endeavor. With the right tools and resources, you will be able to make your dream come true. However, you may find yourself looking into hiring a financial advisor to help you sort out your finances first.
Just the thought of owning a new home is exciting, but you must keep your senses and remember that this is a very important financial decision. In fact, it will probably be the most important financial decision that you will ever make. One of the first things you should do is scour over your credit history. A high credit rating will earn you a much lower interest rate and mortgage payment.
- Excellent Credit – 720 and up
- Good Credit – 690-719
- Fair Credit – 630-689
- Bad Credit 300-629
Falling in the fair or bad credit score ranking will not necessarily mean that you’ll have to toss your dream out the window. No, it just means that you will have to work extremely hard to add points to your score. Credit card debt is most every consumer’s worst nightmare. It is nearly impossible to eliminate credit card balances, but if you want to improve your credit score, you will need to succeed. Focus on the credit cards on which have a small balance and pay them in full.
Avoid applying for credit, because every time you submit a credit application, your credit score will take a tiny dip. Scoring formulas allow consumers to apply for mortgage, student and auto loans multiple times, but never take out more than one loan.
The first step to creating a home-price budget is identifying your net income. This is the money that you have coming in, excluding taxing, social security and 401(k) deductions. You will need to divide your net income into two spending categories (fixed and variable expenses) and then further divide it into three basic categories (savings, wants and needs). It is important to include a savings account for an emergency fund.
It is a necessity to track your spending. Document your daily spending, so you can utilize it for further references. This will help you plan your monthly expenses and find ways to reduce your daily spending. Remember, every one small saving will add up over time. One of the best ways to save money is to invest in generic brands and reduce the number of times you dine out.
Exploring Loan Options
One of the most difficult steps of the process will be choosing a mortgage loan. Believe it or not, there are various options available, which means you will need to do your research.
- Adjustable-Rate Mortgage – Provides homebuyers with a low initial interest rate and after the predetermined period, the rates will automatically adjust annually.
- Fixed–Rate Mortgage – Provides homebuyers with predictable payments, with a consistent interest rate.
- Construction–to-Permanent Loan – Provides consumers with the option of financing the property they already own. This is great for individuals that want to renovate their existing home or build a new one.
- Low Down Payment Mortgage – Provides homebuyers, with limited income or credit, an affordable option.
- Veteran’s Administration Loan – Allows active duty, veterans, and National Guard personnel to refinance or purchase an owner-occupied home.
- Home Equity Loan – Uses the equity in the consumer’s primary or secondary residence to finance large projects. This is a fixed-payment and fixed-rate loan.
Preparing To Shop
Now, it is time to start shopping for your new home. Before you set out, you should create a checklist of the most important factors and things that you are looking for in a home and the neighborhood. To help you with this process HUD has created a Buying a Home Checklist template (see below for link) that consists of a list of important points, nearby public facilities, and neighborhood data. It is recommended to make several copies of the checklist, so you will have one for every home you tour.
Once you complete your home touring, you can compare your ratings to see which home suits your needs and preferences the best.
HUD Buying a Home Checklist Link: http://portal.hud.gov/hudportal/documents/huddoc?id=checklist-en.pdf