Buying a Home in 2019
There are several reasons you may be looking to buy a home. Perhaps you want to start a family and are in need of a larger space. Maybe you just got a promotion and raise, and you feel you are in a good place financially to invest in a home. Or you may just be ready to stop paying rent and put down roots as a homeowner.
Deciding whether or not to buy is a very personal choice, and there are a lot of pros and cons to weigh.
Some potential homebuyers may have been spooked by interest rate hikes in 2018, and we are still in a rising-rate environment. This year may be a good time to buy a house, in part to avoid potential further increases. You also may have an easier time finding a home, as some markets may be leaning more toward buyers than sellers.
“It is reassuring to see the recent increase in available homes for sale relative to last year, as the lack of inventory has been a major constraint to purchase activity for quite some time,” said Michael Fratantoni, Mortgage Bankers Association chief economist and senior vice president, research and industry technology.
A home purchase may be one of the largest you ever make, so be sure you are ready to make such a financial commitment. Once you have decided homebuying is the right move for you, here are the steps you should consider.
Get your credit ready to buy a home
Your credit score helps lenders determine if you are a good risk, so it will pay to get your credit in as good shape as possible before you look into getting a loan. Credit can take some time to build up or be repaired, but there are moves you can make to improve your credit before you apply for a mortgage.
Get your budget ready to buy a home
In addition to mortgage payments, there are other housing expenses that should be factored into your budget, including insurance, homeowners association dues and property taxes. Lenders will also take into account your debt-to-income ratio (DTI), which is the relationship between your monthly debt payments and income.
LendingTree has a tool to help you calculate your DTI here.
Get your income ready to buy a home
While situations vary, lenders typically prefer stable incomes to freelance income or income generated by commissions. If you are a freelancer or gig-economy worker, you may have to work harder to get a loan. There are steps you can take to make a case for your income to lenders.
Get your savings ready to buy a home
Along with the down payment on a home, you should also take into account upfront closing costs, potential repairs to the property and other possible expenses. Because of this, it’s important to understand how to document your savings and what you should and shouldn’t do with your money before getting a mortgage.
Get your paperwork ready to buy a home
While mortgage applications are mostly done online these days, you will still need to have easy access to heaps of documents related to securing a mortgage loan. If you have these documents organized and ready to hand over, you can save time if any issues arise during the home loan process.