Getting Your Finances In Order
This is part 1 of a series of 7 articles that guide potential buyers through the home buying process. These articles provide insight and suggestions to help homebuyers find the home of their dreams.
The Orange County Register predicts 2014 will be the year of the buyer. Why you ask? Because as the economy improves, the number of foreclosures is dropping and the market is shifting away from investors and toward home buyers, both new and recurring. You can read more predictions about the 2014 housing market but the question is, are you ready?
If you are, then the first step you need to take before you can find the home of your dreams is getting your finances in order. The key to getting your finances in order is figuring out what you can afford and shaping a realistic expectation for what your “dream home” will be. We would all love to live in a $4 million dollar mansion in South Orange County, but that’s not a realistic dream for most of us.
Tip 1: Check Your Credit Score and Credit Report
Before you do anything else, take a look at your credit score. Credit scores range from 350 to 850 and the higher yours is, the better. This credit score is based off of your credit report which includes your history, personal information, inquiries from other lenders, and judgments on you like bankruptcy.
When you apply for the loan the buy your house, the type of loan and interest rate you qualify for will be largely dependent on this number. A good credit score is in the 700’s, usually anything above a 730 or so. Don’t worry if your credit score is lower than you’d like it to be, there are ways to improve it. Most importantly, you should contest any inaccuracies. The health of your credit is worth fighting for.
Tip 2: Figure Out What You Can Afford
Now it’s time to take a good hard look at your finances and figure out exactly what you can afford for a down payment, monthly mortgage payments, and other homeowner expenses. It is important to figure out these specifics now so you know what you can afford when you’re doing online searches and visiting open houses. There’s nothing dreamy about a mortgage you can’t afford.
Check out this mortgage calculator to help you figure out what kind of monthly payments you can expect based on home prices and interest rates. You will also need to research types of mortgages to help you determine which is best for you. One of the most important choices you will be making is fixed-rate vs. adjustable mortgage. Review your options and decide which best fits your financial situation.
Tip 3: Current Homeowners – Do You Have Equity?
If you already own a home, how much equity to do you have? At the end of last year, foreclosures in California hit an all time low since the height of the housing boom back in 2005. CoreLogic reported that rising home prices helped bring 53,000 underwater homes above water in 2013 which equates to more homeowner equity. That means if you’ve been waiting to sell, now is the time.
With home prices rising, now is the perfect time to cash in that equity you’ve built up and put it toward your new dream home. During the recession tons of homeowners were forced to put their lives on hold for financial reasons. Parents saw their grown children return so were unable to downsize their large family homes and families looking for a bigger better home to accommodate a growing family couldn’t afford it. But with the economy improving every day, now is the time. The market is now prime for current homeowners to take advantage of their hard earned equity so they can put it toward their new dream home to fit their ever changing lifestyle.
If you are just beginning the home buying process, email us at clientservices [at] firstteam.com or call 888-870-1142 and we'll connect you with an agent to help you through the process. Speaking of which, tune in next week when we go into the importance having an agent and the fact that their services are free for buyers...
Agents – What is the first step you advise prospective buyers to take in the home buying process?
Buyers – What questions do you have about starting the buying process?
Originally posted at: http://www.firstteam.com/blog/?p=7289
