As the housing market recovers and a new year brings new plans, you, like many others, may be considering buying your first home. While it’s tempting to just focus on where you want to live and worry about the rest later, you may run into serious roadblocks if you’re not starting these 3 steps now.
1. Start saving
You probably already know you’ll need some cash for a down payment. Putting a certain amount down isn’t just a good idea because most mortgage lenders require it — a big down payment can also help you get a better deal on mortgage terms. All else equal, the more you put down, the less risky the mortgage appears to lenders.
Something else to consider when saving for a down payment? Private Mortgage Insurance (PMI). If you don’t have enough cash for at least 20% of the total mortgage loan amount, a PMI premium will be added to your monthly mortgage payment. Lenders can require that you pay this PMI premium until you have at least 20% equity in your home.
2. Start planning your move
Chances are, if you’re buying a home for the first time, you’re renting now. If that’s the case, take a look at your lease. If you’re getting close to the lease’s expiration date, make sure you can rent month-to-month because buying a home can take time.
If your lease doesn’t expire for some time, read it carefully to see what it says about early termination — you may have to pay a penalty or notify the landlord a certain number of days ahead of time.
Of course, you can always reach out to the landlord because virtually everything’s negotiable. Just make sure you get new agreed-upon terms in writing, signed by your landlord as an amendment to your existing lease.
3. Start monitoring your credit
Your credit health is a critical factor when it comes to qualifying for a mortgage or getting the best terms. Building good credit can take time for any number of reasons:
Even if you just checked your credit and it’s in excellent health, you’ll want to do what you can to help protect it in the time leading up to your mortgage application. With TransUnion Credit Monitoring, it’s easy to:
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What You Need to Know:
There are various types of credit scores, and lenders use a variety of different types of credit scores to make lending decisions. The credit score you receive is based on the VantageScore 3.0 model and may not be the credit score model used by your lender.
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