The housing market in America has seen a decline in property values by as much as 9% while fees have risen by an average of .5%. But in spite of these scenarios that shake the housing market, investing in your own home is still the best investment you can make in your lifetime.
I want you to make the best out of your home investment, so I have here some tips to make it work to your advantage.
1. If you have enough money to cover at least 22% of the cost of the home, then that is the amount you would need for your down payment. You ask, “Why 22%?” Because when you make a 20%-plus down payment, you avoid mortgage insurance and other fees. Most home mortgages implement stiffer restrictions when lending to home buyers by requiring mortgage insurance to cover the unpaid balance. On the other hand, fees usually fall between 8% and 10% of the home price over a 30-year paying term.
If you have to make a choice between a number of homes, choose the one with the price that falls within the 20%-plus down payment range.
2. Buying a new home requires that you have a strong credit rating. A low credit score can result in smaller loan principal at a much higher interest. Buying a home with your spouse can help but you have to be sure that both your credit ratings are high as lenders usually base the loan on the lower score.
To boost your credit score, do not apply for additional loans. Be sure that you have not used more than ⅓ of your credit line at the time of your application.
3. Set aside at least 31% of your annual income for your home mortgage. Make some calculations considering your down payment and your future monthly amortizations. From there, plan to set aside 31% of your before-tax income to pay off your mortgage.