Factors to Consider Before Buying a Home – Home Buyer Advice
By Guest Financial Columnist Angelina Brown
Buying a new home has always been a dream for everyone but while there are so many people who have the dream about it, the reality is that re are very few who are able to achieve this dream. The entire process of buying a new home is often intimidating and a daunting task as the process can’t be completed on your own. You need to take help of the professional financing options and take out a mortgage loan with which you can realize your dream of buying a home. A mortgage loan is a secured loan that pledges your home as collateral. It protects the lender and if by some strange reason you default on the terms of the loan or are delinquent repaying the loan. You might be wondering about other important factors that you need to consider while buying a new home and before taking out a mortgage loan. Here are some factors that you should take into account before realizing your dream of buying a new home.
- Do you have a stellar credit rating to take out a home mortgage loan?
Are you aware of the fact that you need to have a stellar credit rating for obtaining the best mortgage loan? If answered no, you should first check your credit report to locate all the negative listings that are dropping down your score. It is only when you’re able to improve your credit score to at least 720 that you can think of getting a mortgage loan within your means at a better rate. Take all the required steps to improve your credit score before taking out a home mortgage loan.
- Will you be able to afford the monthly mortgage payments?
Determining your mortgage affordability is yet another important decision that you need to make before taking out a home mortgage loan. A mortgage loan is a secured loan that is spread throughout a longer span of time or term of loan and that has to be repaid with the principal amount, the interest rates, taxes and insurance. Check your total monthly income and then make sure you’re able to bear the monthly payments throughout the term of the loan without defaulting on them. Take out a mortgage loan that is only within your affordability to avoid any kind of further mess.
- Do you have a low DTI ratio to grab a loan within your means?
Apart from your credit score, another figure that is important is your DTI ratio or the debt-to-income ratio. This is the ratio between your total income and your total debt obligations. If you have a high DTI ratio, this will mean that you might not be able to manage your monthly mortgage payments after tackling all your debts. Therefore, you should initially try to lower your DTI ratio by repaying your debts so that you can grab a loan within your means.
So, when it comes to buying a new home, you require taking all the above mentioned factors into consideration. Choose the best mortgage loan and make timely payments to avoid a foreclosure of your home. Use a mortgage calculator to calculate the payments and thereby manage your finances.