Preparing for Home Ownership
The first step to home ownership is saving. One should save money first in order for him to purchase one. Home ownership is investment. You have to save more money first for you to purchase the best one. There are several things you have to consider in saving. About the down payment, nowadays, you may now able to buy a home with as little as 0 to 5% down payment. Another one is the closing costs; these are the fees that are required to obtain a mortgage and transfer of the home with the help of an attorney. Another is the post purchase reserve funds. These are the funds that you may need to show to the lender. This provides assurance that the mortgage can be paid even if you are experiencing cash flow problems. At least three months’ worth of mortgage payments is a good amount to have in reserve.
In order to get a mortgage, especially one with a low interest rate, you usually need to have a good credit score. Your score is calculated using data from your credit report, which is compiled by three bureaus. A lender may check your score from all three bureaus or only one. Many lenders require a score of at least 680 to get a mortgage, and those with a score in the mid-700s and above usually get the best interest rates. If your score is lower than 680, you may only qualify for sub-prime loans, which usually have a high interest rate, or find it difficult to get any loan.
These are the factors that are used in calculating credit score. Payment history which is 35%, amount owed which is 30%, length of credit history which is 15%, new credit that is 10% and types of credit used that is 10%.