If one of your future goals is to purchase a home, it’s never too early to start preparing yourself financially. One of the major factors that goes into getting approved for a home mortgage is your credit score and credit history. All lenders will look at your credit worthiness to determine how much they will lend to you. The following are steps you can start taking now to prepare your credit for buying a home in the future.
1. Check and update your credit report: Consumers are guaranteed at least one free credit report a year; get a copy of yours to see where you stand. If you find errors, you can contact the creditor or the bureaus to address any invalid information.
Sometimes buyers are anxious to look for a home and want to get started right away. However, the first step in the home buying process is getting pre-approved for a loan. Before issuing a pre-approval letter, a lender will check a person's credit, income, debt, and assess their overall financial position. From there, the lender can state that you qualify for a loan up to a certain amount and issue a pre-approval letter. A pre-approval letter is a necessity for the following reasons:
In today's market, you should have at least 5% percent of a home's purchase price for a down payment. This means a $150,000 home could require $7500 down plus closing costs. If you saved $313 a month for the next 24 months, you'd achieve that goal. On the surface, that may seem difficult—but it's not. Make some short-term sacrifices now to save for a down payment on a house.
If you don't have a budget, now is the time to create one. Examine each line item and ask yourself, “What can I do to reduce this amount?”
Your annual property tax is based on your taxable value. First, figure out the market value of your home. Zillow.com and trulia.com are great resources, or you can contact me and I can send you info on recently sold properties in your neighborhood. Take the approximate market value and divide that by half. If this number is less than your taxable value, you may be paying too much for property taxes! The people who may benefit the most from a tax appeal are people who bought their homes at the peak of the market, between 2000 and 2005. For the exact appeal process, check your local city or township website.
See a step-by-step guide on how to appeal your property taxes at http://www.mirealtors.com/content/upload/AssetMgmt/Documents/propertyassessment10.pdf
Fixed Rate- A loan with a fixed rate simply means the interest rate does not change over the life of the loan. Most people prefer this loan type because the payment amount will not change much, making this loan the most predictable.
Adjustable Rate Mortgage (ARM)- This type of loan usually start with a really low rate. After a certain amount of time, the interest rates can change with market conditions. This type of loan may be an advantage to someone who will not live at a property for more than a couple years. However, the unpredictability of this loan is a big downside.
Great info on everything real estate.