6 Financial Prerequisites You Must Be Aware of Before Buying a Property
Buying a property is a difficult task. It’s a huge investment for most people and probably a benchmark for things they had wanted to achieve in their lives. So, making sure you are on the right track and up to date with the market is important. You need to make sure you know how much money you should be investing in different types of property, so you don’t make any major mistakes later.
Here are some things you need to keep in mind before purchasing your next property:
1. Have Enough Down Payment
When you purchase your new home, you’ll need to show them that you have a sufficient amount of down payment. If you don’t, it is possible that you will not be able to go through with the payment. A lot of lenders now are hesitant to give out loans since the past several years. They now only cater to people who can provide them with a substantial amount for the down payment.
Someone who borrows money without paying any down payment is more likely to leave the home up to the bank to take over. If you’re someone who has enough down payment to prove your interest in the property, you’re more likely being successful in getting your home loan approved.
2. Make Sure You Can Afford Your Interest Rate
You’re going to spend a large part of your life paying interest. You’re most likely to spend thousands of dollars in the span of your life paying back loans and the interest that comes with them. This is why it is important to find a mortgage that has an interest rate that you’ll be able to afford.
You may not realize it at first, but having a low interest rate will help you save thousands of dollars over the long-run. One way to do this is by getting prequalified for a mortgage. You have to take the necessary documentation to the bank, like your income and savings information. They will then be able to tell you how much money they can lend you. This will help you determine what price range of homes you should be looking at.
Pick out a mortgage that works with what your priorities are. If your aim is to have small monthly payments, your agent will be able to help you accordingly. If you plan on moving again in a few years, there are different mortgages available for that as well.
3. Your Credit Card Score Should Be Above the Requirement
Your credit score will determine whether you’re maxing out on your credit card or not paying your bills in time. This can prove to be a huge hurdle for potential home owners because it tells the bank whether you’re going to be paying your bills in time and whether you are in a lot of debt.
It makes sense for lenders not to loan money to you if you have a very low credit score. It means that you rely heavily on credit cards and are probably not going to pay them back anytime soon. If you haven’t been paying your bills on time, this will also reflect on your credit score.
4. Your Debt-to-Income Ratio Should Be Less Than 43%
You may be inclined to buy a house that is bigger than you can realistically afford. You need to keep your goals reachable and go for a property that you know you can pay off. A bank will use your dept-to-income ratio to determine if you can afford the home you want. If your ratio is more than 43%, they’re not likely to give you the loan.
With the help of expert realtors in Myrtle Beach, and your mortgage team, you can learn more about how much your monthly payments need to be. They’ll help you better understand how to calculate your monthly expenses, debts, and your budget to figure out what kind of property you can conveniently buy.
5. Have All Your Paperwork Sorted Out
If you’re going in to make an investment as big as property, you should have all the required documentation that is needed to successfully go through with the purchase. Ideally, your lender should have a list of all the documents that they need from you in order to proceed with your loan.
Pre-approval for credit is a process where all your documentation is gathered and checked by the lender. It is based on the documents that you have submitted, like your income, debt, assets, and employment information. After this, there is the actual approval. If you aren’t pre-approved, there are chances that sellers, and even realtors will not agree to have dealings with you. This is because they need to have some kind of guarantee, in the form of your pre-approval, that you will be receiving the loan you need for the property so that their efforts don’t go to waste.
Contact an expert real estate agent in Myrtle Beach so that they can help you gather all the required documents and fill out all the paperwork that is needed to proceed with your pre-approval. They’ll be able to give you an idea of what you need to take care of before you can start finalizing the purchase of any property.
6. You Should Be Able to Pay Closing Costs
Closing costs differ depending on who and where you’re lending your money from. They’re usually 1% of the loan amount that you have, but in some cases can exceed up to 3% as well. You need to be prepared to pay the closing costs by making sure you ask the lenders to provide you with an estimate based on the kind of loan you have.
Final Things to Remember
Buying a new home is a huge step for many. You don’t want to be alone through any part of the process, because you aren’t as experienced in the dealings that take place as someone who does it on a daily basis.
It’s always a better idea to have an expert be involved, to make sure you settle for a house that works with your financial situation and keeps your values in mind as well. If you do enough research before closing on any sale, you’ll be one step ahead. Prioritizing what you want from your new home should help you figure out what key factors to look for when property hunting.
Briggs Dickerson works as a broker-in-charge with Sands Realty Group, Inc. – a prominent REALTOR in Myrtle Beach who helps you find the best properties for sale in Myrtle Beach, Conway, Litchfield & other areas of South Carolina. He graduated from the University of South Carolina in 1998 with a finance and marketing degree. His work experience includes managing a Myrtle Beach landmark for the past 17 years, Peaches Corner. He also has had his General Brokerage license since 1999.