This article was originally published on Citi’s Women & Co.
Buying a home is a big commitment, with tons of important decisions to make along the way. The information below can help you understand the key steps toward homeownership and avoid some of the most common mistakes made during the process.
1. Set a budget.
Before you start looking for your new home, you’ll need to have a good idea of how much you can comfortably afford. When setting a budget, keep in mind that your monthly mortgage payment is not the only expense to consider. Remember to take into account any credit card and installment loan payments, utilities, taxes and insurance. Calculate how much home you can afford using Citi’s mortgage calculator.
2. Save for your down payment.
When you buy a home, lenders may require that you put money down. This is commonly known as a down payment. Down payments can vary based upon the type of mortgage and typically range from 3.5 to 20% of the home purchase price. Get more tips on saving for a down payment.
3. Boost your credit score.
The higher your credit score, the more mortgage options you are likely to be offered and the more likely you are to qualify for a lower interest rate. When you apply for your loan, a lender will typically look at your credit score from each of the three major credit agencies: Equifax, Experian and TransUnion. Often times, the decision will be based on the middle score. (If you are applying with another person, a lender will take the lower, middle score of the two.) To improve your score, you might try paying down credit card balances, avoid applying for new credit cards, and make a concerted effort to pay your bills on time. Learn more about how credit impacts your loan.
4. Choose the mortgage that’s right for you.
With so many types of mortgages available on the market, it can be difficult knowing which to choose. A responsible lender can talk you through your options in detail. A helpful place to start is to understand the differences between a fixed rate and adjustable rate mortgage.
5. Get pre-approved.
Pre-approval is a useful step to take before starting your search for a home. By sharing some information about your income and debt, a lender can provide you with a letter stating how much you’ll likely be able to afford to borrow. In a competitive home-purchase market, sellers prefer offers from pre-approved buyers. If you’re ready to take the next step, you can get a free evaluation and a Citi mortgage representative will be in touch.
For more tips and resources to help with your homeownership journey, visit Citi Homeownership.
Linda Descano serves as a Managing Director and Head of Digital Partnerships, Content and Social for North America Marketing at Citi. In this role, she is responsible for creating and delivering competitively differentiating consumer engagement experiences in digital and social channels to drive brand health and business goals. Linda is also President and CEO of Women & Co., a service of Citi that brings women relevant financial content and thoughtful commentary to get them thinking and talking about money. Linda is regularly featured as a speaker and media expert on a wide array of personal finance, content marketing, and leadership topics, and recently was recognized by Advertising Women of New York (AWNY) with a Changing the Game Award and by National Association of Female Executives with a Women of Excellence Award for Community Service.
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