When you’ve decided to buy a house, you don’t need to know everything about real estate going into it, but there are still some important things to learn about beforehand. This post will go over some of the key points to know before you buy your house.
Credit Score
Your credit can be a huge factor in what kind of loan and interest rates you’ll be able to get. Knowing your credit score will give you an idea of what lenders can offer you, and if you need to improve your credit score, you’ll have time to do so before the purchase. Higher credit scores offer better interest rates.
How Much You Can Afford
A good rule of thumb is to keep your housing expenses lower than 28% of your monthly gross income. For example, if you make $10,000 a month, your monthly mortgage payments, property taxes, and homeowners’ insurance should not exceed $2800.
Also, take note of your debt-to-income ratio. DTI is a portion of your monthly gross income that goes towards other monthly debt payments like car loans, school loans, and other forms of payments. You want a DTI of 36% or below, and the lower you go, the better.
Down Payment Options
The down payment is what you may upfront for your home purchase. Lenders usually offer different mortgages with different down payment options. Exploring options can help you decide how much you’ll need to save for your down payment, and many states/cities can offer different forms of down payment assistance.
How Much You Can Borrow
Apply for mortgage preapproval and a few different lenders. You’ll then have multiple preapproval letters from different lenders saying how much they can loan you under certain conditions. Compare these to choose what’s best for you.
Know Your Local Housing Market
Browse online and get reports from local real estate agencies that can tell you about local home prices, inventory, and demand for homes in your area. This will help you gauge your competition too.
Where to Live and What House
Every city has different neighborhoods with different personalities. How do you want to live? Are you driving to work? What things do you want to live nearby? City, suburban, or rural life? All of these questions and more are what you’ll have to answer when it comes to where you want to live.
The same goes for your house. There are more options than just a single-family home. Look around at the different styles and see what suits best for you and your lifestyle.
