It is not too early to think of 2020 home financing plans if you suspect that next year will be the time you take the plunge and become a homeowner. In fact, the earlier the better!
Decisions like this should never be rushed. While you will need to act quickly to take advantage of the best rates, a well-planned strategy will help you know when that time is and how to act once you get there.
In the following article, we will be discussing the top five steps you need to take to capitalize on home financing in 2020 and land the best rates. Let’s get those applications ready, shall we?
Are You Ready for a Home Loan?
Anything worth doing should start with self-examination. Specifically, are you in the right mindset or financial situation to take on a home mortgage or refinance an existing loan? To clarify whether you are there, start with the following:
Consider the Responsibility
Owning a home requires things from you that few other purchases ever will. It is one of the only purchases you can make where someone else, like a Homeowners Association, can come in and tell you things you must do or have done in order to keep owning it without financial penalties.
So before you make that deal with yourself, consider where you are at mentally, physically, and financially. Do you have the patience to devote even more of your budget to things that need to be fixed right away? Are you capable of doing the maintenance and repairs on your own, or do you have the money to pay someone else?
Speak to Your Circle
Sometimes we get blinded to our readiness because we do not see ourselves the way others do. If you have any trusted confidantes — even if it is just one — what do they think about your decision to purchase a home?
Ask them some of the same questions you should be asking yourself. They often can give you better insight as to whether you are in a place to be a homeowner.
Weigh Your Financials
Buying a home is one of the most expensive purchases you will ever make. It is not enough to be able to afford the mortgage payment. You also want to hold out around one percent of value to address any issues that arise on an annual basis.
That means if the home is worth $250,000, you need about $2,500 annually, or over $200 a month extra on top of mortgage installment to adequately do the job. How much discretionary income do you have in your budget? Do the math before you buy.
Once you have gone through the quick checklist above, it is time to focus on getting the best rate. We have broken it down into five specific steps with a bonus at the end. Let’s continue!
- Save for a Down Payment
Are you buying a home instead of refinancing? Try to put a substantial down payment on the total purchase price of the home. This option shows a lender you are serious about following through.
For those looking to refinance, HARP mortgage loans come with their own specific set of requirements. Go through the checklist and see whether the time is right to re-up. Specific factors for eligibility include:
- Getting the mortgage through or guaranteed by Fannie Mae or Freddie Mac
- Loan-to-value ratio of at least 80 percent
- No late payments in the last six months
- No more than 30 days late on current payment
Either way, a down payment can help by lowering the overall amount you plan to borrow. This option makes you a safer bet in the eyes of the lender.
- Lower Your Credit Utilization Ratio
How much available credit do you have? If you are using more than 30 percent of it, then your credit utilization ratio is dangerously high.
This reality makes lenders nervous because they assume you are living beyond your means. You can lower credit utilization by paying cash for more things and ceasing new credit card purchases (assuming you are also making payments).
- Pay Off Bad Debts
There are certainly good reasons to take on debt. Credit cards never account for any of them. If you are getting a new home mortgage or HARP loan, then the number of debts you have could disqualify you from consideration or require you to borrow a much smaller amount of money than you actually need.
Avoid the problem altogether by taking out some of those bad debts before you consider applying. Target low-hanging fruit first, then roll those payments into other larger debts. Keep going until you have gotten your CUR low enough for reconsideration.
- Target Homes or Refinance Amounts in Your Range
Requesting a lower home or HARP mortgage can be a good option if you do not have time to wait on building up your down payment. Aiming lower can give you something manageable to work with while building equity and allowing you to get used to living on a budget.
- Act at the Right Time
Pay attention to what is happening in the news. The Federal Reserve could lower or raise rates at any time. Home prices also may fluctuate more rapidly in certain areas over others.
Target the opportune time to buy. In the meantime, focus on the other suggestions we have offered here.
When you do get ready to apply for a home or HARP mortgage, shop around. Speak to as many lenders as you can and do not feel badly about playing them off one another. They may not want to admit it, but many aspects of a mortgage are negotiable.
The more conversations you have, the more your confidence will grow. You will also know what approaches to use for the best results.
You Can Capitalize on 2020 Home Financing
Consider your 2020 home financing goals first and foremost. Go in with a plan, and then spend the rest of your time working toward its execution.
Above all, get as much of your financial house in order as you can and learn how to time the market for the best break-in point. By following the suggestions that we have posted here, you will be ready. If you are ready to see what you qualify for, contact us today.
7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with every phase of each mortgage transaction. If you are searching for a home loan in New Jersey, Pennsylvania, Virginia, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.