Long considered to be the realization of achieving the American Dream, home ownership has gotten tougher for many people in recent years due to home prices going higher and higher. However, even if you are not independently wealthy, you can still make your home ownership dream come true. To do so and make sure your budget is not stretched to its limits or beyond each month when making your mortgage payment, here are some financial factors you need to consider before signing on the dotted line.
Figure Your Debt-to-Income Ratio
Before you buy a home, take some time beforehand to figure out your debt-to-income ratio. To do so, figure up your monthly expenses, then divide the total by your gross monthly income. If your ratio comes out between 10-30 percent, you should be okay. Anything above 30 percent could make it harder for you to obtain financing since lenders will be unsure if you can afford your mortgage payments.
Consider the Costs
To get the home you’ve always wanted, don’t make the mistake other potential homebuyers make and fail to take into consideration the various costs and fees that will be included in your home’s final cost. These usually include closing costs, a mortgage application fee, expenses for a home inspection, and other expenses that may arise at the last minute from either your lender or the seller.
When obtaining financing for your home purchase, don’t forget you do have more options than you may realize. For example, you may find private equity representation can help you in purchasing your home. Another option may be to seek out low-interest loans, such as FHA loans. In many cases, loans such as these are applicable to potential buyers who have lower credit scores that typically would disqualify them from many traditional loans.
Improve Your Credit
While you may be able to obtain an FHA loan or similar loan should your credit score be less than ideal, taking some time to improve your credit score before trying to purchase a home is often an excellent idea. To do so, begin by checking your current credit report for any inaccuracies it may contain. Also, try paying as many bills as possible on time each month, since this also helps raise your credit score.
Even though today’s home costs are extremely high, don’t let this discourage you from buying the home you’ve always wanted. Instead, take these various factors into consideration, use common sense and good judgment, and don’t give up until you have the best financial deal for your home purchase.