TIPS EVERY HOMEBUYER SHOULD KNOW

Buying a home is the single largest investment most people will make in their lifetimes. Photo Credit: Canva Photostock

by Laurie Goodlock, Vice President, Farmers State Bank

Buying a home is the single largest investment most people will make in their lifetimes. The choices homebuyers make are likely to affect their long-term financial health and even their retirement prospects. So what are the dos and don’ts in home buying?

“It is important to take an honest look at your budget first to make sure you are fully prepared to buy a home,” Craig Goodlock, Chairman and Chief Executive Officer of Farmers State Bank said. “Preparation is key to navigating today’s market.”

Goodlock shared four actions residents should take before buying a home:

Review your finances. A thorough analysis of your financial situation is central to the decision to buy. Calculate all your monthly expenses, in addition to your potential mortgage payment, homeowner’s insurance, taxes and association fees (if any). Factor in other obligations like car payments, credit card debt and living expenses. Budget for home maintenance costs as well. Aim to keep the mortgage payment and all other obligations below 36 percent of your monthly income and stay within your budget when considering a home.

Check your credit score. Your credit history is an important factor when applying for a loan. Your Fair Isaac Corporation (FICO) credit score is also important because it is used to determine how well you manage your debt, and it is calculated using data from your credit report. A lower credit score can result in a higher interest rate on your loan.

If your score is too low, you may not be approved for a loan. There are a number of steps you may take to improve your credit score, including paying bills on time, only opening lines of credit you need and keeping your credit card balances below half of your available credit. To learn more and get information about improving your credit score, visit www.myfico.com.

Organize your finances before going to the bank. Obtaining a loan requires a few different documentations including, but not limited to, pay stubs, tax returns and financial statements less than 60 days old. Provide copies of additional monthly payments such as car loans, credit cards and student loans. Also, bring any additional information that may help your banker positively evaluate your financial situation.

Factor in closing costs. Once you have found a home within your budget and have agreed on a purchase price, closing costs associated with finalizing your purchase will arise. These costs may vary and will depend on the purchase price and whether a real estate attorney or title/escrow company will be involved in the transaction. By law, lenders are required to provide you a written estimate of closing costs within three days of accepting your loan application.

Taking these upfront steps may do more than lower long-term costs and protect the homebuyer’s finances. They may determine whether the dream of owning a new home becomes reality.