Home sales have increased approximately 3.7 percent in the last year. With this in mind, should you be considering buying a home. If so, Scott Gamm from TheStreets offers a few words of advice.
Having a high FICO score is critical when applying for a mortgage. In the months prior to filing your application, make sure you don’t hold any balance on your credit card. Debt is the biggest reason why a credit score can suffer. Also, limit your credit use to under 30 percent of your credit limit. If you have a $1,000 credit card limit, keep your spending to $300 a month and pay off the balance in full. This will show lenders that your spending is in check.
Do you have enough cash? Lenders will typically require buyers to foot the bill for 20 percent of the home’s value. If you don’t have that kind of cash, start saving. Don’t withdraw money from a retirement account to fund your down payment – if you’re thinking about doing that, then you’re not ready to purchase a home. Withdrawing money prior to the retirement age results in penalties.
If you don’t have 20 percent, you can apply for a loan from the Federal Housing Authority (FHA). These loans usually require a 3.5 percent down payment and are open to borrowers with a lower credit score – typically 580 or higher, so that’s a wider window. FHA isn’t a lender – it insures your mortgage – but you can search online for lenders that are approved by the FHA.
When deciding what home to purchase, think long-term. In five years, will you have kids? You don’t want to find yourself needing to move again in a few years – moving is expensive.