Spring – especially in Michigan – is a time of rebirth. After surviving the winter months, many people come into spring ready for change. While some focus on spring-cleaning or gardening, there are others who are ready for a much larger spring project – buying their dream home. If you find yourself ready to begin looking for a new home, there are some things you should keep in mind so that you’re able to take advantage of the spring buying season.
You don’t want to waste your time looking at homes you can’t afford. This is why it’s a good idea to calculate how much monthly mortgage payment you can afford before beginning to view properties. As a general rule, homebuyers should look to pay no more than 30 percent of their gross monthly income on a mortgage payment. Additionally, you should aim to spend no more than 36 percent on your total debt, including your mortgage payment and other debt such as a car payment and credit cards.
While this formula is not set in stone, it is a good way to get a ballpark range for how much you should be looking to spend.
Boost your Credit Score
Knowing your credit score before starting the home-buying process is an important step in the preapproval process. Lenders use your credit score to determine if you qualify for a mortgage and at what mortgage interest rate. Obtain your credit reports to determine if the information is correct, if there are late or missed payments, amount of money owed on credit cards and if any information needs to be corrected.
If your credit score is lower than it should be to be able to purchase a home, then take the time to improve your score to where it needs to be. It is possible to improve your score, but it does take time. There is no fast way to increase your score. It makes sense to wait until you improve your score before purchasing a home. Read our past blog about credit mistakes people make, to learn more about potential pitfalls to avoid.
Before you start house hunting, you should consider getting prequalified for a mortgage. A prequalification letter is a must-have in today’s competitive market. It shows you are serious and can also help your offer stand out.
Find a reputable lender and meet with a mortgage loan officer to start the prequalification process. Your lender will request copies of income documents and bank statements and pull your credit report. After review of all of this information, your lender will determine how big of a loan you are eligible for and issue a prequalification letter. Once you present the prequalification letter to your real estate agent you are ready to start viewing properties.
Build up your Savings
Buying a home is expensive. You will need enough money for the down payment, closing costs and other mortgage-related expenses. The amount you will need will vary depending on the loan program and the home you want to buy. When you meet with your lender, ask for a Loan Estimate to determine how much you will need to purchase a home.
Buying a home can be a stressful and overwhelming process, but doing your homework and connecting with a mortgage company you trust can make things a lot easier. If you have any questions or are just looking for tips on getting ready for the spring home-buying season, be sure to visit MichiganFirst.com/Mortgage or call us at 800.664.3828.