Four Signs You're Ready for Homeownership
There’s a lot of excitement surrounding the homebuying journey. But there’s often a fair bit of uncertainty as well.
Buying a home is a big financial investment, one that many people will undertake only a few times in their lives. Deciding you want to achieve the dream of homeownership is one thing.
But how do you know if you’re truly ready for it?
There are some signposts and milestones that can signal potential borrowers are in great shape to start the journey. Let’s take a look at four key ones.
Credit Under ControlRegardless of the loan type, you’ll need to meet a lender’s qualifying credit score if you’re looking to secure a mortgage. The minimum cutoff can vary depending on the loan program and the lender.
For example, VA lenders are generally looking for a score of at least 620. Conventional loans will require a significantly higher score. FHA loans are usually somewhere in between.
Prospective homebuyers with a handle on their credit at the outset are setting themselves up for success. Beyond helping you qualify for a loan, a stronger credit profile tends to mean better rates and terms.
Get free copies of your credit reports at Annual Credit Report.com. Check them in detail for mistakes, bad accounts and other errors that could be dragging down your score.
Veterans hoping to improve their credit can talk with the Lighthouse Program at Veterans United. This free service helps veterans and service members develop a plan to boost their scores and get in position to prequalify for a loan.
Some Mortgage Know-How
You don’t need to be a mortgage expert to buy a home. But it’s a good idea to do a little homework and start evaluating the different loan options available given your particular financial situation and homebuying goals.
VA loans aren’t automatically the best mortgage option for every veteran. If you’ve got outstanding credit and enough cash for a sizable down payment, you might be better off pursuing conventional financing. But that kind of financial and cash flow situation isn’t the norm for many service members, veterans and military families.
Look for lenders and loan officers who can help you explore your options and find the product that makes the most sense for you. Be your own best advocate and arm yourself with as much knowledge as possible.
Cash on Hand
The up-front costs associated with getting a mortgage are going to be different for everyone. Part of it depends on what kind of loan you’re getting. For example, borrowers with VA and USDA loans don’t need to worry about down payments.
Conventional and FHA buyers will need to put down at minimum 5 percent and 3.5 percent, respectively.
But all loans come with costs and fees, from earnest money deposits and appraisals to home inspections and closing costs. There’s no hard-and-fast rule for how much cash you need, but figure anywhere from $600 to $1,000 for the appraisal and inspection alone.
Lenders can give you a much better estimate of your closing cost needs in the early stages of the loan process.
Success and Stability
Lenders take on risk with every home loan. Credit score benchmarks and other requirements exist in part to help them mitigate risk and identify borrowers who are good bets.
Mortgage lenders love to see stability and a track record of success when it comes to credit, finances and income. If you currently make rent or mortgage payments, having a history of at least 12 consecutive on-time payments is a great sign (and for some lenders this may be a requirement).
Employment scenarios are incredibly subjective, so it’s best to talk with a loan officer in detail. Just know that changing jobs or careers could have a serious affect on your loan chances.
Make sure any plans to take out new credit can wait until after you complete the homebuying journey. Going on a spending spree right before you start the loan process – or worse, during it – can send the wrong signal to lenders and force you to put your homebuying dreams on hold.
You should also be prepared for the financial responsibilities that come with homeownership, from making regular mortgage payments to paying maintenance costs and other expenses.
Ready to get started? Talk with a Veterans United loan specialist today at 800-VA-LOANS.