Home Financing

Especially if you are a first-time buyer, purchasing a home may be frightening, not just because of the large amount of money involved, but also because of the oftentimes tedious process of dealing with banks that offer home mortgage programs. As a good buyer, you need to be prepared mentally and of course financially before purchasing your dream home.

Buying your dream home is probably the biggest and most expensive financial transactions you’ll ever have to make, which is why you need to make it right the first time. The process involves a dizzying and daunting set of rules, and with the right knowledge and know-how all these may come easy.

Below are three helpful tips to bear in mind before purchasing your new home:

A good credit score ranges from 700 to 759, and if yours is below this range you’re definitely at an immediate disadvantage. This, however, doesn’t mean you’re no longer qualified to borrow money to purchase your dream home. There are still financial institutions that offer home credit programs for consumers with poor scores. Although these may require you to pay higher interest rates, remember that you at least get to purchase your dream home.

You may also want to get a copy of your credit report and check for accuracy and correctness of information. If there is an error, call the credit bureau and ask them to fix it. And if it needs improvement, fix them by starting to pay your bills and credit card balances on time. This process may take some time, most especially if your credit score is very low.

While you may have the option to borrow money even when you have a poor credit score, it is still better to borrow when your score qualifies better interest rates. This allows you to save tens of thousands of dollars in a 20- to 30-year mortgage.

The amount varies from one bank to another, but most lenders would require that you pay at least 3% of the total amount. The rate that others would charge may also depend on your credit history.

Just remember that the bigger money you put as down payment, the lesser your monthly payment will be for your mortgage and the lower you’ll have to pay for interest. This allows you to save a lot of money which you can use to pay for the principal.

 Saving money for down payment may take a long time and could come from various sources, including the money you save each payday, money you get from selling your old house, and money granted by your family and friends, and sometimes employers and nonprofit organizations. You may also save money by lowering your expenses and handling your finances well.

Before getting approved of a home mortgage, seek preapproval from your chosen lender to see how much you can borrow. Three of the most important things that lenders would look into to get you preapproved of a mortgage are your monthly income, the total debt that you need to pay monthly aside from the home mortgage in case you get approved, and your credit score.

Signing a home mortgage agreement means you are agreeing to pay the amount of money you borrowed to purchase a home, along with the interest rates and other associated costs. This would take a lot of preparation and effort on your part, but this also means you get to purchase the home you’ve been dreaming for years.