Looking for a new home might just be more fun than work! Even though you may have purchased a home before, it’s important to remember that not every part of the experience will be exactly the same. One of the key pieces of a good purchase is financing– the good news is that it can be a straightforward, and painless process! Here are some simple tips and things to consider:
Get your credit in order.
As always, when purchasing any type of real estate, the state of your credit is a significant factor in how smooth the financing process will be. Your credit score will likely need to be in the low to mid-600s to qualify for a mortgage. Of course, the higher your score, the more competitive the interest rate you’ll be able to secure. If you know you’ll be considering a home purchase in the near future, check your credit now so you can take pre-emptive steps to strengthen your score if needed.
Set savings goals.
Just as your lender will take into account how much you can afford, given that you already have a home, you should do the same. Start by figuring out how much money you’ll need to save for a down payment.
For your primary residence, targeting a down payment of 5-20 percent of the total purchase price is typical.
In addition to the down payment, you’ll also need to account for the cash needed to cover closing costs and any reserves if required. Reserves range from 2-6 months of income that you would need in order to pay your mortgage in the event you experience an interruption in income.
Once you understand your savings goals there are many ways to make saving your targeted amount easy—like automating your savings, cutting back on unnecessary subscriptions, and paying off credit debt.
Keep the future in mind:)
If you don’t convert your vacation home into your primary residence at some point in time and, instead, sell without purchasing another vacation home, you’ll pay taxes on the gains.
Whether you’re planning to purchase a home in our area or somewhere else, the best way to ensure your success is to work with a real estate professional. Reach out for more details on how to get started!
