Whether
you're a first-time homebuyer or you've bought before, there's a lot
you can learn when it comes to the subject of borrowing money to buy
your dream home. When buying a home for the first time, the process
can be somewhat overwhelming--and this can lead to hasty
decision-making that often ends in regret. If you've borrowed money
to buy a home in the past, you might want to consider doing thing
differently the second or third time around. If you're thinking about
borrowing money to buy a home, don't go into it blindly--check out
these 8 helpful borrowing tips for homebuyers.
Improve
Your Credit Score
If
it's been a while since you last viewed your credit report, find out
where you stand before you go asking for a home loan. Your credit
score will be scrutinized by prospective lenders, and if it's less
than stellar--the number of borrowing options available for you to
choose from will decrease significantly. If your credit could use
some TLC, take some time to improve it before you begin approaching
lenders. Devote at least six months to improving your credit, if
possible, by paying your bills on time, paying down your credit cards
and other loans, and not making excessive purchases that don't fit
within your budget.
Don't
Borrow More Than You Can Afford
Just
because you're approved for a larger-than-life loan doesn’t mean
you should take it. Don't buy a home that's way beyond your
means--and don't borrow more than you can afford to pay back. The
cost of your home each month including your mortgage payment,
property taxes, homeowners insurance, and maintenance shouldn't
account for more than 28% of your income. Going above and beyond that
could put you into a financial hole that will seem impossible to
climb out of.
Shop
Around for the Best Loan
Instead
of taking the first loan that's offered to you, shop around with
other lenders in order to find the best deal. Low interest rates and
reasonable closing costs are just a couple of the things you should
be looking for when deciding who you should borrow from.
Consider
the Different Types of Loans
There
are several different types of home loans available--take the time to
learn about each one so that you can make an informed decision as to
which one is best for your situation. Some different loans you should
familiarize yourself with include fixed-rate mortgages, adjustable
rate mortgages (ARM's), and government loans such as an FHA loan or a
VA loan.
Inquire
about Mortgage Programs
If
you're a first-time homebuyer or you have bad credit, you may be able
to enlist the help of a loan program if you're having a tough time
getting a loan. Do some research online to find some good loan
programs, or ask a reputable lender or mortgage broker to steer you
in the right direction.
Consult
a Mortgage Broker
If
you find the task of weeding through lenders and loan types to be a
daunting one, consider working with a mortgage broker. A successful
mortgage broker will know which lenders will be able to meet your
borrowing needs, find you the best deal, and guide you through the
buying process.
Choose
a Shorter-Term Loan if Possible
If
you can afford to, choose a shorter-term loan so that you can pay
back what you borrowed as soon as possible. If you're unable to
commit to a shorter-term loan, try to pay extra towards the principle
each month if you're budget will allow you to do so. The faster you
can pay off your home loan, the closer you'll be to more financial
freedom.
Read
the Fine Print Carefully
A
home loan is a huge financial commitment, so know what you're getting
yourself into before you sign anything. A home loan is always
accompanied by a substantial amount of fine print--don't overlook it.
Read your loan agreement over carefully, and ask for clarification if
you come across something that you don’t understand.
Don't
let the stress of borrowing money spoil the excitement that comes
along with buying a home. If you conduct a little research, consider
you options with care, and avoid over-estimating your means--you'll
be able to make a smart borrowing decision that you'll feel confident
about.
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