December 9, 2019
Are you thinking about buying or building a home in 2020? Prepare for your dream home early and get ready to start the path to homeownership in the new year.
Save Early
What kind of expenses should you anticipate when saving for your home loan? It’s not just the down payment you’ll need to save for–here is a list of common home loan expenses:
- Title insurance
- Appraisal costs
- Pest inspection fees
- Origination fees
- Discount points
- Credit report fee
- Survey fee
- Property taxes
- Mold abatement (where applicable)
- Document prep
- Compliance inspections
You will also want to save early for unexpected costs including contingencies where the appraised value of the property is lower than the asking price. Some borrowers like the home so much they are willing to pay the difference in cash between the asking price and the appraised value, but you cannot be forced to do so.
But if you DO choose this option, you will need the funds to make up the difference, which cannot be included in the loan amount.
Expect The Unexpected Where Interest Rates Are Concerned
Ask any expert on interest rates, lending, or real estate markets and you will learn that 2019 was a very unusual year for mortgage loan interest rates and the direction 2020 may provide is unclear at the moment. There are many variables that could serve to push interest rates on mortgage loans higher or lower.
What’s important to keep in mind about building a home on your own lot in 2020, or buying an existing piece of real estate, is that you don’t rush into the process just because there are low rates on offer this week or next. Interest rates are subject to change at any time depending on circumstances.
It’s better to make sure you are financially ready for your home loan and commit at that time rather than chase the lowest interest rate possible.
Take Enough Time To Work On Your Credit
We (and many other publications) sound like a broken record when discussing the need to make sure your credit is ready for the new loan. But it’s true–if you do not take the time to prepare your credit with a year of on-time payments or better (and other factors) you will not be truly ready to talk about the mortgage with a lender.
Your lender needs to be able to justify your home loan as a good risk. Know your credit report well and try to lower the amount of your credit card balances to well under 50% (30% is ideal).
Decide What Kind Of Home You Need
Sometimes, ruling out what you do NOT want is just as helpful as knowing specifically what you do want to invest your hard-earned dollars in. Do you need a home with extra space for a roommate, a hobby, or even a side business? Choose in advance to look at two bedroom properties or larger. Believe it or not, a simple plan like this winds up saving you much more time in the long run.
Not interested in split-level homes or properties with staircases? Add that to your list as well as any desirable alternatives such as homes with open floor plans.
Or perhaps you don’t know what kind of home you need just yet. In cases like these a real estate agent can help you narrow down your choices to a manageable size. Sometimes outside help is very useful when you’re looking to buy or build a home.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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