Buying a house is part of the American dream and it is probably the first long term investment that many of us face. It may be a sound investment but the need to buy a house comes from our need for security and building a nest. Sometimes this decision is made without realizing that this investment in the long run might represent a big percentage of the total family net-worth. It is of extreme importance that we get ready for this big step and to move forward with confidence that we are doing the right decision at the right time. In order to be ready for this we suggest you meet with one of our Wealth Advisors to develop a sound savings plan and that will include the following check list.
- Check your Credit Score
Make sure you find out how good your credit score is with the three main agencies. 1. Equifax, 2. Experian and 3. TransUnion. If your credit score is far from perfect then make the right corrections. Understand that besides not being delinquent in your loans the score also takes into consideration if you are paying your monthly bills on time, how much debt you have, how many times you have made loan requests in the last 6 months and many times you have been turn down for a loan.
- Assess your job continuity
Most home loan request will review your work history. They are looking for job continuity and stability. The assumption here is that risk is reduced if the home buyer is not a candidate for finding himself without a job. Job continuity doesn’t refer to working for the same employer for a long time but showing that you have no gaps of employment in your work history. The most forgiving reasons for gaps in your work history are military, school and illness.
- Find out what is the monthly payment you can afford
A very common mistake that “first time home buyers” make is to pick a house they want to buy and then when they are already emotionally committed they start looking for ways on how to afford the house. In order to avoid the “house broke” effect that comes from buying a house that is too expensive for your earning you should first review how much you can afford on monthly payments. This analysis should take into consideration any unforeseen expenses coming from the home purchase and should allow room for additional savings.
- Save for a substantial down payment
Regardless of the minimum payment requirements the lender is requesting you should always try to save for a down payment of 20% of more. A down payment above the minimum requirements will make the lender more willing to take risks, also your interest rate will be lower and it might accelerate the total loan re-payment. Keep in mind that when buying a house your down payment savings will be reduced with the amount of money you will need for “Closing Costs”; which could include appraisals costs, legal fees, realtor fees, and lender processing fees.