We recently received the following question from a home buyer:
Question: How do I know if I am in a position to buy a new home?
Answer: Your best bet is to meet with your bank or mortgage broker so they can give you a better idea of your financial position. But initially you can ask yourself a few simple questions:
Will you be happy living in the same place and maintaining it for a few years at least, if not longer?
What does your credit situation look like? You should get a copy of your credit report and correct any errors that may be on it such as late payment charges that aren’t accurate. Usually any changes made on your report take at least one to three months.
Are your bills being paid on time? Recent late payments affect your credit score more than older late payments. If you have a history of being late with your payments, start now to pay them on time and your credit score will improve.
Have you closed any credit cards? This is not a good idea if you have plans to apply for a loan. Since banks look at your account balance to credit limit ratio, when you close accounts you will lower the amount of available credit you have and your ratio of debt to available credit will increase. If you don’t use some of your credit cards you should wait until you have the loan before closing them.
Are you working at paying off your debt? Your total debt should ideally be less than 25% of your credit limit. If that’s not the case, pay off as much as possible as soon as possible
Do you plan to open any new accounts before getting your loan? This could hurt your credit score as well since you won’t have a payment history with the new account. The average age of your account is a factor in your credit score, so opening a new account right before applying for a loan will lower the score.
Are you living paycheck to paycheck? If you don’t have enough money to come up with a down payment, cover closing costs or a higher monthly payment, chances are you are not financially ready to buy a home. You should start saving all the money you can before buying.
Do you have a steady income? Have you had a job on a regular basis for the last 2-3 years with an income that is reliable?
If you feel you are ready to make a purchase after looking at these questions, you should make an appointment with your bank or a mortgage broker to get pre approved for a mortgage. This is an important step so you will know what price range you can look in.
Then, of course you should choose an agent to help you with the buying process. You should meet with them to let them know what you are looking for and together come up with a plan of action.
To contact an agent, you can go to http://www.peihouses.com
To contact a mortgage broker you can contact Geoffrey Woodford |