Buying a home for the first time is not only a huge decision, it’s most likely one of the largest investments you’ll make in your lifetime. Although you may be anxious to have a place you can call your own, and it really is a good time to buy, be sure you take a long, hard look at your budget and current financial situation before rushing into anything of this magnitude.
Getting Started in Buying Your First Home
If you’re a first-time home buyer, here are 4 things you need to do:
Determine where you stand financially and start figuring your budget – look at your credit profile, expenses, income, and outstanding debt. Most lenders are looking for a 43% DTI (debt-to-income ratio), although some may accept up to50%, and a minimum 620 FICO score. Next, calculate your living expenses such as fixed outgoing costs and recurring monthly payments, then subtract that from your total earnings after taxes. The remainder is what lenders refer to as your discretionary income.
Factor in the additional costs of owning a home – as a renter, there are expenses you don’t have to be concerned with, so it’s a little more difficult when budgeting for home ownership. In addition to your monthly payment, there are 4 additional elements that figure into it including:
- mortgage principal
This is commonly known as PITI. The first two are covered in your monthly payments while you have to manage your homeowner’s insurance and property taxes.
Research your down payment options – you’re not required to put down 20% like most people think. In fact, many individuals will put down less. Furthermore, some lenders will allow you to utilize a range of lower down payment options. However, if you put down at least 20%, it will eliminate the need to purchase PMI or private mortgage insurance.
Figure out how much house is affordable – many lender’s websites have a tool that will enable you to personalize your mortgage financing options and it only takes a few minutes to use them. All you need to do is enter personal information such as:
- the kind of home you want to purchase
- the estimated purchase price
- the down payment you can afford
Once you’ve done this, you’ll see different loan options that can be tailored to your specific needs and requirements, including your monthly payment breakdown. We are here to assist you with the whole process.
Buying Your First Home with Granite West Funding
To learn more about the home buying process or to find out the mortgage loan options available to first-time home buyers, contact Granite West Funding today at 559-540-2275. Our representatives are here to assist you through the whole procedure and help you get the best rates and mortgages.