Buying a home brings a host of emotions. Excitement, nervous energy, fear, and more play into the process. Before looking into housing options in Coos Bay, Oregon, a few steps can be taken to relieve the anxiety and increase the joy as you consider home ownership.
Evaluating your assets, liabilities and monthly cash flow proves vital to a successful home search. By tracking spending and income for at least a few months, you gain a realistic financial picture. No guessing here. Accurate numbers are crucial to an accurate picture. Inflated numbers only work to deflate dreams in the long run. Consider some of the figures to assess before you embark on your search.
Wise financial planning dictates that no more than 28 percent of your gross monthly income should be tagged for home ownership (front-end ratio). Your back-end ratio considers all monthly debt obligations and should not exceed 36 percent of your total income.
Do the math. Down payments add up. Usually, this rings in at 20 percent of the home’s purchase price. While a lower percentage can be negotiated, this figure prevents you from purchasing private mortgage insurance (PMI) at an additional cost.
Loans and other fees
While a lender assists in adding up these costs, keeping them in mind in the early stages of budgeting proves useful. The later emergence of the magnitude of these fees can deflate potential buyers. Interest, closing costs, loan fees, taxes and home insurance rival the price of a home. Debt-to-income ratios, in addition to a down payment, give an idea of affordability – upfront and monthly. Also, online housing cost calculators help lay out the reality of home ownership in terms how much the house costs to purchase. These can be useful tools in assessing your budget.
Make Your Own Financial Choices
It is unwise to depend solely on the bank to determine the house payment your budget can handle. Doing the work ahead of time settles your thinking on the issue and better prepares you for the process. Also, lending agencies have been known to approve higher than healthy ratios.
2. Boost Your Credit Rating
Credit ratings get mortgage loans approved. A score between 700 and 720 gives buyers good rates, while a score of 740 or above provides access to the best interest rates. Scores of 640 or 660, in most cases, make up the bottom line for home loan approval. Sizable fees and large down payments accompany these lower scores.
Check Your Score Early
Checking your score early on (six months to a year) in the process bodes well for landing a better rate. Credit reports are available for free once a year. Once you receive your credit reports, examine them to find issues so you can work on correcting them right away. This can help to boost your credit score. Search for mistakes, credit utilization ratio, and unpaid accounts or collection amounts. Correcting mistakes and paying collection accounts, plus keeping utilization ratios to less than a third of your available credit used, speaks well for home buyers.
3. Find a Lender
Before you go shopping for a home, find a lender to determine how much you can afford to spend on your dream house.
How to Find a Lender
Seek references from friends, colleagues, and neighbors as to reputable, trustworthy options and those with a good working relationship. Lenders offer expertise in the home buying process, cost saving options and stay within your budget. Pre-approval can also be handled through your lender. A lender helps sort through figures of interest, closing costs and taxes to further enhance your understanding of buying a home. This can also help buyers avoid surprises down the road.
4. Do Some Window Shopping
Much like a car, consumers are unlikely to buy the first house they see. Shop around to get an idea of what you like best before you make an offer.
Getting a Real Deal on a Home
A deal is not a deal if you do not like it. To find a home that meets your needs and your dreams, do a little window shopping. Home tours, open houses, and the Internet provide plenty of opportunities. Make a list of the home features that you desire. Prioritize the list and determine your non-negotiable features. This list will be important to narrow your home search and negotiate with your budget. Work with a local real estate agent who can show you a variety of available homes in your favorite neighborhoods.
5. Get to Know Your Neighbors
The home you are able to purchase does not solely rely on your budget. Other factors add into the equation, such as the surroundings.
Check Out the Neighborhood
Determining if you could live in this home and community for five to seven years offers a good return on investment. Considerations include the job market, cost of living, demographics, access to public transportation and social activities. Search around online to find out the costs of perspective properties. Compare these figures with your budget to get a realistic picture of what you are able to afford and the down payment required.
While excitement may drive you to jump into the home search process, the work you do before shopping around lays a foundation for successful home ownership. Headaches and frustrations decrease and dreams are realized by simply doing some basic legwork. And Coos Bay, Oregon may just be the place you decide to call home!
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