Get Your Home While It’s Hot

The average house price in 2009 has depreciated in most areas around the country, which is good news for buyers. Add to that incentives like the 8,000 home buyers credit for new home buyers and even existing homeowners, and everyone has something to cheer about in the housing market. With low mortgage interest rates available, if you’ve been sitting on the sidelines waiting for the market to bottom, now’s the time to jump right back in, but first you have to qualify.

Stricter Financing Terms

Days of zero financing are gone and now lenders really do want to see at least 10% down on a property, if not 20%. For an average home in the $180,000 range, that’s a whopping $18,000 to $36,000 that you need upfront. In addition, closing costs can range from $3,000 to $5,000. The good news here is that many existing homeowners who want to also take advantage of the $6,500 homeowners credit may be willing to finance your closing costs so they can sell their home and buy a new one.

Credit scores are very important for the mortgage process, and you should try to fix as many inconsistencies in these reports before you apply for a mortgage. The actual credit ends in April 2010, and it can take three months or more to straighten out errors, so start now. Get your ducks lined up so that when it comes time to apply for the mortgage, you will spend less time resolving credit errors and potentially being declined for a mortgage.

Buy Only What You Can Afford

Not that the lenders will let you buy more house than you can afford, but it pays to know what fits in your budget. Usually, your housing costs should be no more than 30% of your total budget, but a conservative estimate would be 28%. Anything more than that is not going to sit well with your lenders, who want to be sure you can afford the house you are buying so that you don’t default on the mortgage.

Add A Buffer For Emergencies and Moving Costs

Getting a home is financially stressful. There are mountains of paperwork, negotiations, and finally the closing. However, you’re still not out of the woods. You have to be sure you can move your belongings to the new house, and that often takes even more money. If you haven’t got any belongings to move, you will need to furnish the home. Either way, you will be spending more money. If during this stressful period you should have another emergency, like the water heater breaks, you will now be responsible as a new homeowner for getting it fixed too. Hopefully, that won’t happen, but it’s better to plan ahead to have a small cushion of money to help you get settled. If that’s not available because the housing process tapped you out of funds, you still have other options. Payday loans are one way to fund a short term emergency expense, and once the closing is finalized, you can opt to use them without fear of them affecting your chances of impacting the mortgage decision that is now over.