Whether you are moving on from your parent’s home, a college dorm, a friend’s couch, or a rental — owning a home of your own is a big and exciting step. People may try and deter you from being a homeowner but just like any other financial investment, there are things you need to know.
4 tips for first-time homeowners:
- Pay a little extra on your mortgage
- You don’t need 20%
- Pay attention to your credit score
- You are never stuck
Pay a little extra on your mortgage
Typically when you apply for a mortgage from your local bank you will be offered a 30-year mortgage to help lower your monthly payments and it makes it easier for you to make your payments. Your bank will want you to have the lowest payment possible so that you don’t default on your mortgage. But, there are things you can do to help shorten the life of your loan if you are financially able to do so. You can make one extra payment a year or pay a little more per month to help get some of the balance down which will save on interest.
You don’t need 20%
We know you’ve heard all your life that you need to put 20% down on your home, but that isn’t necessarily the case. The more you put down will of course help lower your monthly mortgage payment, but it is not needed. When you put 20% down you will not have to worry about paying PMI or Private Mortgage Insurance. This will save you money and will not be added to your monthly payment.
Pay attention to your credit score
Your credit score doesn’t have to be 750 or 800 to buy a home, but it helps. You will need to speak with your bank’s mortgage office to see what credit score they are looking for when applying for a home. The higher the credit score you have the better. Why? Higher credit scores can help save you money with things like fees and can also get you a better interest rate.
You are never stuck
Just because you decide to buy a home does not mean you are stuck there forever. But, you should plan to be there a couple of years at least. If all else fails, you can look into renting out your home so someone else can pay your mortgage payments.
If you have questions about home buying or selling, be sure to contact one of our expert agents today.