I’ve seen my fair share of shows on HGTV where perfect couples find the perfect home of their dreams. But as a Realtor, I know that buying a home isn’t as perfect as many TV shows make it out to be.
That isn’t to say that buying a home is a terrible or trying experience! It’s just a little more difficult than some people think.
Here’s a few things about buying a home that you typically don’t hear about.
Furniture is Expensive
I have a degree in interior design, so believe me, I love furniture and decorating.
But that stuff can be extremely expensive – you can easily spend thousands of dollars on a new living room set, dining room set, or bedroom furniture.
If you want to save a little money, consider refinishing existing furniture by restaining it or painting it. You can also sell old furniture and use the proceeds to finance that new couch that you really want for your new home.
Though having furniture is certainly important, having money in the bank to cover unexpected expenses is even more important!
A Big Downpayment is NOT Required
Though many homebuyers think that a 20 percent down payment is required to buy a home, nothing could be further from the truth. Granted, putting a big chunk of change down will reduce your mortgage payments, but it isn’t necessary to do so.
Many lenders require less than 5 percent for a down payment, and if you meet certain criteria (i.e., you’re a first-time homebuyer or a veteran of the armed forces), you might get financing with zero down. Often, there’s zero-down programs just for living in a rural area like Fremont County, too.
If you don’t meet that 20 percent threshold, you’ll have to pay Private Mortgage Insurance (PMI) which protects lenders from the added risk of a lower down payment. PMI boils down to a monthly payment of about 1-2 percent of your home’s value, so it isn’t a huge amount of money to pay to avoid having to put down a huge sum of money at closing.
Leave Your Finances Alone While Home Shopping
As you go through the process of looking for a home and seeking out lending options, you’ll want to keep a very close eye on your debt-to-income (DTI) ratio. What’s more, you’ll want to ensure that you don’t impact your DTI by opening new credit.
For example, if you know you need new flooring in the bedrooms in your new home, don’t get a new credit card to pay for it. In fact, don’t put that expense on an old credit card, either!
Opening new credit before you close can negatively impact your DTI and might negatively affect your ability to qualify for a loan. So can adding to your balance on existing credit.
What many people don’t understand is that closing existing credit can also negatively impact your credit. If you have a card that you never use, leave it open because all that unused credit both boosts your credit score and improves your DTI. Just leave your finances alone until you’ve closed and have your new keys in hand.
Abiding by these rules of home buying will help you make the process of purchasing your dream home one that’s much smoother!