Get these out of the way before you start house-hunting.
Are you buying a home for the first time? Before you start looking at wrap-around porches and bay windows, here are five things you need to do.
2. Set a budget. One good rule of thumb is to make sure your house doesn’t cost more than 2.5 times your salary. If your household income is $100,000, then $250,000 should be your max.
3. Figure out which type of mortgage you want. So this breaks down to: fixed-rate versus adjustable rate. A fixed-rate loan is when the interest rate and payment stays constant for the entire loan, usually 15 or 30 years. An adjustable-rate mortgage has a fixed interest rate that then resets after a certain period. A good rule of thumb is that if you can afford a home only if you get an adjustable-rate mortgage, then you can’t afford a home.
4. Figure out your down payment. Banks usually want a 20% down payment — so $50,000 for that $250,000 house. But first-time homebuyers qualify for an FHA loan. You’ll need just 3.5% down, or about $9,000.
5. Get pre-approved by your bank. Your lender will look at your income, assets, and credit history. Then the lender will give you an informal okay that you’ll be able to borrow a certain amount of money.
After that…start looking! And contact us at Tress Realty!
Source: Money Magazine's Dumb Money
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