To build or buy a new home you need to look at getting yourself into the best possible financial shape for buying a home.
Clean up your credit report
Do you know what your credit history looks like? Whether you do or don’t, before starting the new home buying process you should get a copy of your credit report.
Now is the time to clean up any blemishes that may appear within the report that could haunt you later during the mortgage process. It’s common to uncover an error or minor blemish that is simple to clean up before you formally apply for a mortgage.
How Much Downpayment Will Be Needed For Your New Home?
How much downpayment you will need depends on the following: the purchase price of the new home, your financial situation and the type of mortgage you choose. In most cases, the downpayment is usually a percentage of the purchase price of the home. Most conventional mortgages require a larger downpayment than government mortgages. If you’re a veteran you may be eligible for a no-money-down loan.
How Much Can You Borrow For Your New Home?
Before you can start planning your new home, you need to know how much home you can shop for.
The Federal Housing Administration (FHA) has found that most people can afford to budget 29 percent of their gross monthly income to housing expenses, depending on total debt. Buyers with no debt can budget as much as 41 percent of monthly income for housing.
Conventional lenders often use the ratio of 28 percent for housing expenses and 36 percent for long-term monthly debt.
Get Prequalified or Preapproved for a Loan
I highly recommend you get prequalified or preapproved for a loan. It gives you the comfort of knowing how much a lending institution is willing to approve, which allows you to focus your new home desires on what you can afford.
Now that we got that out of the way it’s a good time to seriously start planning your new home.