With record low interest rates, it is cheaper than ever to borrow money to buy a home.
If you’re thinking of buying a home in 2021, here are 4 things you can do now to be prepared.
Chip away at your debt load
This time of year it’s super easy to put things on our credit cards as we shop for loved ones. But if you’re thinking about buying a home, lenders want to know that you will be able to pay them back. Lenders will evaluate your debt ratio to ensure that you can manage a house payment on top of the rest of your debt. Most lenders prefer a debt ratio of 36 percent or less. So, setting a goal of paying down your debt is a good gift to yourself if you’re thinking about buying a home in 2021.
Work with a lender to get prequalified for a mortgage
Start a conversation with a few local lenders. This process will determine how much you will qualify to borrow for your home purchase. The best lenders will also give you a roadmap to get your finances in order if you’re not ready to buy right away. It’s free to talk with a lender, and can make you a stronger buyer in 2021.
Start saving money for the down payment
Ideally, your down payments will be 20 percent of the purchase price of the home. If you don’t have a large down payment saved up, lenders may accept down payments as little as 3 percent. Which is why it’s good to start speaking with a lender sooner rather than later – you may need less money than you think to buy your dream home in 2021.
Save for closing costs
These are the hidden costs of buying a home. Most people just think about the down payment. The closing costs are the fees associated with getting a mortgage, like the appraisal, insurance, taxes, and other fees. It’s possible to ask the seller to pay for some of these, but it’s not a guarantee. Closing costs can amount to several thousand dollars.
Have questions about the home buying process? Get in touch or give me a call at 828-412-0678.