Economists are predicting that 2020 will be a positive year for the housing market — good news for home buyers. As any home buyer can tell you, buying a house is a long series of “I didn’t know that” moments. From choosing the right home to qualifying for the right mortgage, it’s important to try to minimize the number of things you don’t know.
With a landscape in lending that is shifting, unpredictable interest rates, and down payment priorities that can vary greatly, it’s important to do your due diligence. If you’re thinking about buying a home in 2020, here are 3 questions you should ask yourself first.
With reported major shortages of homes for sale in many markets throughout the United States, getting preapproved for a mortgage loan is more important now than ever before. Cash buyers typically give sellers confidence that the deal would close quickly, but there aren’t many cash buyers shopping the market right now (learn about the Reali Cash Offer, which gives you a competitive edge in the real estate market by increasing your chances of getting the home you want — and at a lower cost).
When houses weren’t in such scarce supply, buyers weren’t facing these pressures unique to strong seller’s markets. But with a lender lined up, and a preapproval letter in your hands, sellers know that you’re serious about buying a home. Shopping for a home before getting preapproved for a mortgage is a big mistake that many buyers make because they don’t understand how many potential deal-breakers there could be in the process.
One of the first steps to take when you’re thinking of buying a home is to examine your financial health — and a big piece of that is finding out your current credit score and checking your credit report for errors. Typically, a FICO score of 620 is considered to be the minimum credit score necessary to buy a house, although some lenders are willing to work with buyers who have a lower score.
Working to improve your credit score before applying for a mortgage loan can save you thousands over the lifetime of your mortgage. It’s important to be in the best financial shape possible when it’s time to buy a home. To keep your credit score in tip-top shape, you’ll want to avoid any major credit purchases or opening any new lines of credit leading up to your application. It also never hurts to enlist the help of a credit monitoring service to help prevent any fraudulent activity during this critical time, as well.
Many industry experts agree that homebuyers should strive to have a 20 percent down payment ready when shopping for a new house. Of course, there are a number of mortgage options that allow for a smaller down payment, but they often require private mortgage insurance or a similar regular payment.
Also, many HOAs, co-ops, and condos require a minimum 20 percent down payment. Keep in mind that a down payment of this size will help to save you money over the lifespan of your mortgage. For instance, paying a 20 percent down payment rather than a 5 percent down payment on a $300,000 home will likely save you more than $50,000 over the lifespan of the loan.
Whether you’re in the market to buy your first home or you’ve already gone through the home buying ringer, we’ve got your back. At Reali, we offer you a home buying process that you can trust. Find your perfect home at the best price, with an experienced local agent.