Ready to achieve the American dream of homeownership? There’s no doubt you have many questions and are a bit nervous, and that’s okay! Check out these tips from Quicken Loans® on how to save for your perfect home:
- Create a Goal. Look at your budget and decide on your goal monthly payment. Keep in mind, if you have been renting that this amount should include taxes and insurance.
- Get Preapproved. Once you have an idea of a budget, reach out to a home loan expert to be preapproved. This will help determine how much money you are eligible to borrow.
- Understand Debt-to-Income Ratio (DTI). This refers to a percentage of your gross income compared to your debt, such as car payments, student loans and credit card debt. The Consumer Financial Protection Bureau recommends you keep your DTI at 43 percent or below.
- Make a Home Savings Account. Set money aside each month that you’ll contribute to costs associated with homeownership. Look for ways to trim your budget so you can put more towards your closing costs. Cutting your cable, packing your lunch and making coffee at home all help.
- Prepare for Closing Costs. Just like buying a car, there are certain up-front costs when buying a house that you’ll need to keep in mind. These will be paid at the closing table and include a down payment, escrow and third-party fees.
- Know the Lowdown on a Low-Down Payment. The down payment is the biggest cost you will have to pay at the closing table, as this is assuring the lender you’re serious about your investment. But luckily you don’t need to put 20 percent down since there are a variety of loan product options out there that will help you get your dream home.