The spring home-buying season is upon us, and this year Freddie Mac expects single-family home sales and housing starts to be at the highest level since 2006. As for mortgage rates, while they've inched up, they're still historically low with a 30-year fixed-rate mortgage hovering around 4.5 percent.
Are you thinking of buying? Before you begin house hunting in earnest, it's important to get the facts: because whether you're shopping for your first home or your third, there are some "rules of the road" you'll need to understand.
Here are four steps you should take as soon as you start thinking seriously about buying a home:
- Find out your current credit history and score. You don't want any surprises down the road. If you have no credit history, or have had credit problems in the past, there are steps you can take to build, improve, and maintain strong credit. Contact a HUD-approved housing counselor for free advice at (800) 569-4287 or visit their website for a list of approved counselors in your area.
- Start gathering all of your documentation. Responsible lenders today will want documentation verifying your income (W-2 forms, tax returns, and employment records), credit history, and assets (such as bank statements to verify your savings).
- Consult with your lender to review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for. One important question you'll need to answer is whether you're better off with a fixed-rate mortgage – where you lock in the interest rate for the life of the loan – or an adjustable-rate mortgage in which the interest rate changes. While fixed-rate mortgages are by far the most popular choice, you need to know your options.
- Talk to your lender about applying for a mortgage and getting a pre-approval letter. This letter provides an estimate of what you might be able to borrow – provided your financial status doesn't change – and demonstrates to home sellers that you're a serious buyer.
Today's market continues to evolve, but all of the tried-and-true homebuying rules still apply. So, do your research, reach out to the professionals, stick to your budget, and be sure you're ready to take on the financial responsibilities of being a homeowner. If you follow these rules, buying a home can be a very rewarding experience.
Want to learn more? Check out our free, online CreditSmart® training courses – designed to help you make more informed financial decisions on homeownership and more. Module 11, for example, is all about Becoming a Homeowner.
Did You Know:
- The 30-year fixed-rate mortgage is the product of choice for nearly 90 percent of today's homebuyers.
- Since 2009, our funding has helped more than 620,000 first-time homebuyers realize the dream of homeownership.
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