Smart Moves When Buying a Home - Key Takeaways
Is it better to rent, or to buy?
- Understand the advantages of both buying and renting. The better choice for you depends on your circumstances.
- Know where homeownership fits into your larger financial plan, and evaluate your individual financial situation and priorities.
- Think about other factors: Do you plan on moving frequently? Are you able to afford home maintenance expenses and repairs?
What can you comfortably afford?
- Learn how the relationship between your income and total debt could affect your home buying budget.
- Know your debt-to-income ratio, which is the percentage of your monthly income that is spent on debt.
- Talk to your lender before you go house hunting so you focus your search on homes you can comfortably afford.
What impact does your credit have on mortgage rates and your overall ability to buy a home? How can you improve your standing?
- Know how the financial decisions you make may influence your credit.
- Be aware of the factors that can influence your credit score and be sure to monitor your credit report for accuracy.
- Understand how a lower credit score could impact your interest rate and down payment requirements.
How much savings do you really need?
- Learn how much money you should have on hand when planning to buy a home.
- Consider how much to put down on your home, know your lender's requirements and what a higher or a lower down payment will mean for you.
- Consult your lender and keep cash on reserve for a down payment, closing costs, property taxes, insurance, utilities and unexpected expenses.
What mortgage products are out there? How do you know which is best for you?
- Explore different mortgage options and the benefits of each one for your unique financial situation.
- Learn the key decisions you'll make about your mortgage-and how each could impact your payments.
- Compare different monthly payment scenarios and plan for your financial long term.
What can you expect during the closing process? How can you make sure you're prepared?
- Expect a Good Faith Estimate when you apply for your loan which itemizes the costs of your loan, including estimates of the closing costs.
- Receive your final HUD-1 Settlement Statement listing the dollar amount you need to bring to the closing table.
- Ask your lender for a one-page summary of key terms of your loan in easy-to-understand language like the Clarity Commitment(1) from Bank of America.
(1) The Clarity Commitment® summary is provided as a convenience, does not serve as a substitute for a borrower's actual loan documents, and is not a commitment to lend. Borrowers should become fully informed by reviewing all of the loan and disclosure documentation provided.
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