Purchasing a new home is most likely the largest investment you will make, and homeownership comes with a myriad of benefits including, security, equity, tax benefits, and personal pride and satisfaction. However, many people get in over their heads when it comes to homeownership and biting off more than they can chew with their mortgage. Struggling to keep up with costly mortgage payments, or a house that needs extensive work is not exactly the dream you probably envisioned when considering your first home. To avoid any surprises, here are some tips from Nerd Wallet to navigate the process so you can have the best experience. 

Start saving for a down payment 

Today, it’s common to put 20-percent down on your home, but there are first-time homebuyers programs that allow much less. In the end, it may result in higher payments and mortgage insurance but having something saved is better than nothing. Start saving now if you plan to purchase a home because the cost can add up, for example, a 5% down payment on a $200,000 home is $10,000. 

Use online tools to determine what you can afford  

Coming up with the downpayment for a home, and determining your monthly mortgage payment doesn’t have to be guesswork. There are many online tools available to help you determine your out-of-pocket cost. All you have to do is fill in the details of the cost of the home you’re considering, the down payment, interest rate, and taxes, and the mortgage calculator does the rest. 

Explore your down payment and mortgage options

There are lots of mortgage options out there, each with its own combination of pros and cons, luckily your real estate agent can help you determine what the right option is for you! If you’re struggling to come up with a down payment, here are some loans to consider. 

  • Conventional mortgages: They conform to standards set by the government-sponsored entities Fannie Mae and Freddie Mac, and require as little as 3% down.

  • FHA loans: Loans insured by the Federal Housing Administration permit down payments as low as 3.5%.
  • VA loans: Loans guaranteed by the Department of Veterans Affairs sometimes require no down payment at all.

Check your credit score often and make changes if it’s low 

Your credit score will be a key factor in whether you are approved for a home loan or not so checking it before searching for your dream home is your best bet. You will often see your credit score referred to as a FICO score. This three-digit number, running anywhere from 300-850, is calculated by complex mathematical equations and is used as a way to determine if you are a good credit risk. Before applying for a home loan, avoid opening any new lines of credit like a credit card or auto loan, until your home loan closes. Here are some factors that determine your credit score from The Mortgage Report. Five factors make up your FICO score calculation:

  • Payment history (35 percent of your score)
  • Utilization (30 percent) Your utilization is the amount of credit used divided by the amount available, and lower is better
  • Length of credit history (15 percent) A longer credit history will raise your score
  • Mix of credit (10 percent) Installment accounts like car loans are better than revolving accounts like credit cards
  • New credit (10 percent) Opening too many new credit accounts over a short period can lower your score

Purchasing a new home is a very exciting endeavor and hiring an agent who can help you with the process is ideal so you can avoid mistakes and purchase the home of your dreams. Nancy Hibler of Karges Realty has the knowledge to successfully assist clients in buying and selling homes of any type and within any price range. Whether you’re looking for your first home, moving to retire, accommodating a growing family, or investing in property to make additional income, Nancy has the resources needed to assist you. Contact Nancy Hibler for all your real estate needs by calling 815-263-5791 or visiting her website.