With rent prices skyrocketing in South Florida, it is no secret that it is much wiser to buy than to rent. Still, the task can be daunting for many. Below we have compiled some tips to help when you are preparing to buy your first home. You should also consult with a reputable mortgage and real estate professional for personalized advice in the home buying process.
Build Your Credit
The higher your credit score, the lower your mortgage rate will be. Keep a close eye not only on your credit score but also your credit reports. Check for inaccurate information such as wrong names, address, or accounts that are not yours. Pay off any balances you have and don’t use your credit cards for at least 2 months before you apply for a mortgage. Don’t apply for any new credit until you have closed on your home. Depending on how what your credit score is, it can take anywhere from 6 months to 2 years to improve so the sooner you start the better.
Calculate How Much You Can Afford
While that 5-bedroom, oceanfront home with a pool may sound great it probably won’t be so great if you can do little else in order to afford your home. Ideally, your housing expense should be no more than 25-30% of your monthly income, including insurance and taxes.
Save for a Down Payment and Closing Costs
Down payment for a home can be anywhere between 3.5 – 20% depending on the type of mortgage you qualify for. With the average home price in Broward County at $238,000 and $283,333 for Miami-Dade County (according to Zillow) you down payment could be anywhere from $8,330 to $56,666 or above.
In addition to a down payment you also need to save for closing costs which are usually anywhere between 2-5% of the sales price.
Get Preapproved for a Mortgage
Getting preapproved for a mortgage is free, non-binding and lets the realtor and the seller know you are serious.
During the preapproval process take the time to compare rates and terms. There are many different types of loans and payment options and you should always be careful when considering the different options. Visit at least three different lenders and make sure you fully understand all the terms of the loan.
Preparing to buy your first home is an exciting time. With a little time, preparation, and knowledge you can ensure you make the right decisions.
For assistance in purchasing the best insurance to protect your new home, talk to a Preferred Link agent.