Has the time come for you to graduate into your first home? If so, there are a few crucial factors to take into account before financing. This will more than likely be your first major investment, so you won’t want to make any mistakes when considering the amount of money you will be allocating to this project.
Is your credit up to par?
Your credit history is important in the eyes of lenders. If you have any outstanding debts, make sure you are managing them in a timely manner. Pay your bills on time and try to pay more than the minimum amount due. According to bankrate.com, if your debt-to-income ratio is 36% of less, you’re on the right track. You can check your credit report for free here.
Save, save, and save some more
There’s a lot more money that goes into financing a home than just solely purchasing the house. The Federal Housing Administration requires a 3.5% down payment on a mortgage, but often times most lenders will accept 3%. That being said, if you can afford to put down more, by all means do so. Don’t forget to set money aside in your budget for closing costs and any immediate repairs or improvements you might need to make upon moving in.
Get pre-approved!
You’ll want to seek out mortgage pre-approval before you begin your house search. This will help you determine your budget and figure out exactly how much money you will be able to borrow. HGTV.com suggests being able to afford a mortgage approximately three times your annual gross income.
What type of loan is best for you?
There are two main types of mortgage loans: fixed-rate and adjustable rate. Which one is best for you will depend on several factors, namely how long you plan to stay in your home. A fixed-rate mortgage loan maintains the same interest rate for the duration of your repayment term. The interest rate will not change, nor will your monthly mortgage payment (even long term). An adjustable-rate mortgage (ARM) has an interest rate that will change (or “adjust”), usually every year or after the initial fixed period.
Consider yourself (at home!)
Upon purchasing your first home, it’s important to take the community and your lifestyle into account. Think of your house as home base; it will become the central stake in your life. Therefore, think about your commute to work, the school districts surrounding your home, and whether or not the kinds of recreational activities or nightlife suit you and your family’s style.
Atlanta is a city on the rise; there are plenty of cool neighborhoods within the city worth checking out. Who knows, you just might find your dream house!