Owning a house is one investment everyone should consider at one point in their lives. The good thing about this endeavor is that the housing industry is experiencing a condition called “buyer’s market” with the average mortgage ranging somewhere around 3.47% since 2016.
So, are you thinking of buying a new home soon and don’t know where to start? This article will show you how to prepare to buy a house in one year.
How to Prepare to Buy a House in One Year
Give Your Credit Score A Boost
It’s of the utmost importance to build up your FICO or credit score so you can qualify for excellent mortgage rates.
Make it a point to regularly check your credit reports for errors or identity theft that could be pulling down your score. You can get a free report each year from any of the three major credit bureaus or sign up for credit monitoring services offered by your bank.
The magic number of debt to credit ratio is at 30%. This means that you should only have a revolving balance of $30.000 or below for a total of $100,000 available credit. Keeping a low balance improves your score over time. Don’t close zero-fee credit cards as they can increase total available credit and improve your debt to credit ratio significantly with little to no effort.
Late payments can quickly bring down your score, but it’s easily avoidable. You can set up automatic payments, ask to change all due payments on the same day or have a reminder set each month using an app.
Have Enough Money For A Downpayment
There are benefits to saving up for a down payment on a home mortgage. One, you won’t have to pay a higher interest, and two, you can get a good loan even if you have a lower-than-average credit score.
Housing experts recommend a down payment of 20% for the best value for your money. Start saving up for one year and set aside money to use on a downpayment by limiting your spending to living essentials and necessities only. Remember, the sooner you can start saving, the sooner you can put the money down for a new home.
Know Your Mortgage Types
VA loans are available to those who are on active military duty and veterans alike. You’ll need to pay a fee and the mortgage will have a loan ceiling.
FHA loans are for people who have a low credit score. If you can put a down of at least 3.5 percent of the total home price, then you can opt for this type of mortgage. Keep in mind that FHA loans have higher premiums than conventional mortgages.
Last but not the least, there’s the conventional mortgage. This mortgage option offers the best rates and generally have a faster turnaround time than the others. You will need a good credit score and a significant down payment in order to qualify.
Knowing that you’re going to buy a house within a year and knowing how to prepare to buy a house in one year is another. Once you’ve built up a sizable down payment and keep a good credit score, then it’s only a matter of time before you discover the right house for you or your family. Constantly check up with online listings and real estate websites for deals and opportunities on a house you can call yours.