A home may be the biggest investment you’ll ever make. Be sure it’s a smart investment by asking yourself these five questions before you start your search:
How strong is my financial history?
Your financial history is reflected in your credit score—a three-digit number designed to represent your credit risk to potential lenders. The stronger your history, the higher your score. And the more likely you’ll qualify for a lower interest rate.
What type of mortgage is right for me?
Most mortgages fall into two categories: a fixed rate mortgage or an adjustable rate mortgage (ARM). A fixed rate means that you’ll keep the same interest rate for the life of the loan. This means your monthly payment stays the same. An ARM begins with a fixed rate for the initial period, but then changes based on market fluctuations. This means your monthly payments could change.
How much should I put down?
Down payments are determined by many factors, including how much you earn and where you live. The more money you put down upfront, the lower your monthly payment could be. If you’re concerned about how much cash you have available, ask your lender about down payment assistance programs for first-time buyers and borrowers with low to moderate income.
What home price can I afford?
An online home affordability calculator can help you decide. Simply enter your annual income, monthly debts, and expected down payment, and get a sense of the price range that can fit comfortably within your budget.
What housing expenses should I include in my budget?
In addition to your down payment, mortgage principal, and closing fees, you’ll want to budget for interest, taxes, and insurance. Don’t forget to also account for utilities, HOA fees, repairs, and regular maintenance.