When it comes to buying a home there are many unknowns and uncertainties.
As a mortgage lender in Idaho Falls, Idaho First Mortgage takes great pride in making sure their clients enter the home buying process prepared.
Buying a home is the biggest financial decision you will make, so doing it correctly is important for your long-term financial wellbeing.
As a guide for our clients, we have prepared this checklist to help eliminate some of the unknows that will likely come your way.
This is not a complete list, but rather a guide. As always, contact one of our representatives to discuss specific loan options.
- How Does Your Credit Score Look?
First let’s talk about what a credit score is.
A credit score is a decision-making tool that lenders use to determine credit worthiness.
These credit scores range from 350-850.
A typical credit score should be above 620 for most loan products – with some loan options that will allow down into the mid-500’s.
Why does credit score matter?
Your interest rate and mortgage insurance will be impacted by your score.
The higher your score, the better your rate.
What can I do to get my score higher?
The most important aspect of your score is having no negative credit history.
If you have collections or judgements, these may need to be cleared up prior to purchasing. This will depend on your loan program.
The longer the time period between negative credit items, the less impact those items will have.
Credit card utilization also has a major impact.
As a general rule, having less than 20% of your combined available revolving credit used up will help your score.
Simply add up your available credit from each of your credit cards. Then you will divide this by the sum of all of your credit card balances.
If this number is higher than 20%, work on getting these balances paid down below 20%.
2- What is Your Debt-to-Income?
Your Deb-to-Income is the number a lender will look at when they are trying to determine if you can afford the home you are buying.
Each loan program is different, but your debt to income should not be higher than 50%.
To estimate your debt to income, simply take your total debt, add to it your anticipated mortgage payment, and divide it by your income.
This will help you determine if you need to pay off any debt to help you qualify for a home.
Keep in mind, if all of your debt-to-income is made up of your housing debt, you may need to keep it below 40%.
As with all financial decisions, it is important to weight your comfort level and take into account your new debt payment.
Make sure you have reviewed your budget to see what you are comfortable with. Just because the guidelines go to 50%, that doesn’t mean you need to go that high if you are not comfortable.
3- Do you have Reserves?
Reserves are money you have in a savings, checking or other liquid investment account.
Especially if you have rental properties, you may need to have 3-6 months of expenses sitting in reserve incase there are months you are not able to collect rent.
Reserves are also helpful for any homebuyer as there are unexpected expenses associated with buying a new home.
Having money in reserve – beyond the money you put towards down payment – is always a good idea and helps provide peace of mind.
4- What Program Should I Do?
This is one of the most important questions when it comes to buying a home.
This is where a licensed professional is so valuable.
Here are a few items to consider:
How much down payment do you have available?
How long will you be in this home?
Did you serve in the military?
Are you a first-time home buyer?
Do you need a co-signer?
Knowing the answer to these questions will help you for when you meet with a loan professional.
At Idaho First Mortgage, we are familiar will the loan products that will help anyone who is looking for a home loan in Idaho Falls and the surrounding areas.
We are also very familiar with the Idaho Housing Loan which provides some very attractive first-time home buyer options.
We will look closely at the unique needs of our clients to help them best understand what loan product is going to best suit their needs.
5- Should I do a Fixed Rate or Adjustable Rate
With rates at historic lows, we are seeing that the fixed interest rate and adjustable interest rate are not far from each other.
An Adjustable interest rate may make sense if you know you are going to be in the home for a short period of time.
You will want to weight closely the money saved by the time period to see if it makes sense.
With rates at these historic lows, getting a fixed rate is still very attractive.
One point to consider is if this home will ever become a rental property.
If there is ever a time when you decide not to sell, or are unable to, turning your home into a rental may make sense.
You will want to consider this when deciding on fixed or adjustable, as that will impact the cash flow of a future rental property.
Conclusion to the Home Buyer Checklist
This is meant to be an aide to help you as you prepare to buy a home.
There are many factors to consider outside of these 5 Home Buyer Tips, but this is a good start point.
At Idaho First Mortgage, we are experienced in all of the mortgage loan products you will need if looking to buy a home in Idaho.
We are proficient in working in Idaho Falls, Rigby, Blackfoot, Pocatello, Rexburg, and all of the surrounding areas.
We can help you weight the different loan options to determine which makes the most sense for you.
With this being the largest financial decision you will likely ever make, we pride ourselves in helping our clients make the correct choice.
Our goal is to make sure you make a good decision financially so that your home loan will help you reach your other financial goals.