2019 is literally right around the corner, I mean, literally in less than 12 hours it will be 2019 and here I am blogging on the last day of 2018. 2019 is going to be a great real estate year and even though home prices are going up, they’re not going up so fast that buyers are not buying. However, one good thing for homebuyers is that you probably won’t have as much competition as buyers had over the last two years. Because home prices are going up, there just won’t be that many buyers, and many of those buyers have already purchased a home. So, what do you need to buy a house in 2019? Here’s my list.
#1. You’ll need to understand your credit score.
Your credit score is one of the most crucial elements to applying for a home loan. Get a copy from one of the three major credit union companies in the US, Experian, Trans Union, and Equifax. If there are any discrepancies, correct them as quickly as possible, pay off any outstanding debt, and try to increase your score over 700. This can usually be done within about 6 to 8 months depending on where you’re starting from.
#2. Understand what you can afford.
It’s important not only to know what your own finances look like but what you can actually afford. Most lenders like to see homebuyers spend no more than 40% of their income on housing. This includes a mortgage payment, interest, taxes, and insurance. If you can get that number down to 30%, it’s considered “affordable housing”. And, just because you can afford a certain amount doesn’t mean you should max out your budget. Try to keep your search 5% below your max budget so you have a little bit of extra wiggle room each month in your mortgage payment.
#3. Get ready for the down payment.
Try to save as much as you can because the higher down payment you put down the lower your interest rate will be and the better terms and rate you’ll probably get. You can save tens of thousands of dollars in a better interest rate over the life of the loan. Although 20% is one of the most standards on the conventional loan, FHA and some USDA home loans have down payments as low as 3.5% or even lower depending on the program. However, having some extra money in the bank and reserve funds is set up shows the lender you are prepared in case of an emergency.
#4. Have a healthy debt to income ratio.
Banks are going to look at how much income you have versus how much debt. Of course, the lower the better but lenders like to see no more than about 43% of your income going to pay debts, which include student loans, car payments, personal loans, credit cards, and pretty much any other kind of debt.
#5. Budget for extra costs.
Buying a home is not just specifically the down payment or earnest money, you’ll have other fees such as home appraisal fees, inspection costs, closing costs, homeowner association fees, utility hookups, remodeling or updating fees, gas and utility fees, feasibility or geological study fees. Every home purchase is different but budgeting for these extra costs and having them ready to go will put you in a better spot overall.
Ready to get started? Feel free to call me at any time for details on applying for a home loan for the San Ramon or Contra Costa County area or if you have any questions or would like to see a listing schedule a consultation today.