Are you intent on buying a home in 2022? It’s still a great time to get in the market, but you should be prepared. Sellers continue to have an upper hand, and buyers need to be ready to get ahead of the competition. If you’re getting ready to buy a home, here’s what you need to do now to set yourself up for success later this year.
Check your credit report
The first thing you should do when you’re thinking about buying a home in the near future is to order a copy of your credit report. Aim to do this anywhere from 6 – 12 months before you apply for a mortgage. This gives you ample time to check your report for errors and have them removed. It also allows you time to improve your credit score if it’s on the low side. Remember, the higher your credit score, the more likely you are to qualify for a mortgage and the better rate you will get.
Pay off debt
When determining your eligibility for a mortgage, lenders will look at your debt-to-income ratio (DTI). This is the percentage of your income that goes toward paying debts. Generally, most mortgage lenders will want your debt-to-income ratio to be as low as 30% but you may be able to find mortgage lenders who are willing to lend to you with a debt-to-income ratio of 40% and above.
Start stashing cash
You’re going to need money for a deposit, and the more you can save the better. If you’re applying for a conventional mortgage, aim to have at least 20 percent of the purchase price ready to put down. You may be able to qualify for a government backed scheme, then you will need as little as five percent down depending on the scheme you chose.
Also keep in mind the additional costs when saving for your home purchase. These are fees paid to arrange your mortgage and have a solicitor act on your behalf.
Know what you can afford
In today’s market, you need to know exactly how much house you can afford. This allows you to set your budget and refine your home search to those properties that only fall within your range. This will also help you know how much money you need to have saved for a deposit. Also keep in mind that you’ll have monthly maintenance costs that come with homeownership.
Shop around for a mortgage
Finally, it pays to shop around for a mortgage. Different lenders will offer different loan terms and rates. You could save yourself thousands of pounds over the life of the loan by shopping around. As with any large purchase, know your options so you can choose the best one for your specific needs.
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