If you’re a renter in the Triangle and you’re considering making the move toward homeownership, you’ll want to begin with some smart preparation. As mortgage rates continue to remain low and new government programs have been designed to help create that dream a reality, now is a great time to start thinking about buying a home.
Before you begin, you’ll want to focus on fully preparing your finances in order to set yourself up for success well into the future. Start with the following tips to make sure you’re prepared to buy your perfect home.
1. Start saving.
You’ll need to have money tucked away for closing costs, a potential down payment, and any repairs or move-in expenses you may incur, so the sooner you start saving, the better. If you’re a first-time homebuyer, you may only need 3 percent down, so keep that budget in mind as you’re saving. As an example, 3 percent down on a $250,000 home is $7,500. Meanwhile, closing costs may run upwards of 5 percent of your loan amount
If you qualify for a VA loan or USDA loan, you may not need to put money down on your home, but it’s always helpful to be prepped for the up-front expenses regardless. A larger down payment can also prevent you from paying mortgage insurance, which can add up to an additional 2 percent on your payments each year. On that same $250,000 home, you could pay an additional $100 to $200 each month in mortgage insurance alone. The more you save upfront, the more you may save on your mortgage down the road.
2. Work on your credit score.
Begin understanding your credit score and focus on increasing that score if it’s “fair” or below, and more specifically, anything under 620. Conventional loans are typically approved for those with a credit score above 620. However, government-backed loans like the VA and FHA loans are willing to work with buyers with lower scores. Still, the better your credit score, the better interest rate you’ll be offered by lenders.
Lenders look at your debt-to-income ratio, so make sure you pay off any credit cards with high balances. You’ll need to pay your bills on time and fix any issues you might find on your report. Check with a source like Credit Karma or Nerdwallet to review details without hurting your score. While you’re looking to buy, it helps to keep paid-off credit cards open, but don’t add additional debt, which could negatively affect your chances for approval.
Search luxury home listings in the Triangle area from the Jim Allen Group using the interactive Home Watch map.
3. Figure out what you can afford.
A mortgage calculator can help you plan which homes meet your budget. Keep in mind you’ll want to factor in insurance and property taxes, which are typically paid with your mortgage each month, but held in escrow for payment at a different date. Remember: houses throughout Raleigh-Durham are frequently selling for more than the asking price, so keep that fact in mind as you consider your budget.
Talking to a lender can also you determine an accurate budget, and they’ll talk to you even if you haven’t started looking for a home. Lenders often provide guidance on how to get the best home for your money. They will give you candid advice based upon the financial work you’ve done and will set you up to begin making offers once the time is right.
4. Talk to a Realtor®.
Once you’re ready to buy, a Realtor® will help you find the right home based upon your financial picture. You’ll want to find a Realtor® with whom you connect, because they’ll be negotiating on your behalf and ensuring you get the right home, even in a tough market. They will be your biggest advocate and a necessary resource as you look to buy.
There’s great news for first-time homebuyers, too: A home’s sellers pay for your agent’s work, so you won’t see added costs for this great service. It will only cost you time to find the right Realtor®, who can make all the difference as you shop for homes, make an offer, and head into closing.
While these steps aren’t always easy, they’ll be worth it in the long run when you prep before you start your search.
Thinking about buying a home in the Raleigh-Durham metro area? Check out this list of local professionals with the Jim Allen Group.
The Jim Allen Group is a nationally recognized and award-winning real estate team in Raleigh, North Carolina – ranked the #1 Coldwell Banker HPW Sales Team in the nation.