Homeowners in the United States have had an interesting and unpredictable year. But, this can still even be an understatement considering everything that’s happened.
Wildfires engulfed the western states. Atlantic hurricanes pummeled the State of Louisiana. Then, there’s that “little thing” called the coronavirus pandemic.
Despite this, the 2020 housing market did better than the year before in both price and volume.
Data from the Mortgage Bankers Association shows a 33% increase in mortgage applications for new home purchases.
A typical home used to sell in 28 days. Now it’s down to 16 days. Roughly two-thirds of people who purchased residential properties made an offer on a house they had never seen in person.
Many homeowners also felt it was time to give their homes a makeover. The 2020 Home Renovation Survey reported that 62% of homeowners planned on doing a renovation or maintenance project. Due to the challenging nature of renovation, some of these homeowners may even consider buying custom homes rather than renovating the entire house.
Global health crisis aside, there’s never been a better time to buy a home. Meagre mortgage rates are attracting scores of first-time homebuyers.
If you’ve finally decided to buy a house, here are some of the basics you need to know.
1. Strengthen your credit records.
Your credit rating is a requirement that establishes whether you qualify for a mortgage or not. It will affect the interest rate lenders will offer.
You don’t need to score 740 on your credit report to buy that dream home.
But, there are economic uncertainties due to the COVID-19 pandemic. So, lenders are raising their minimum credit scores. This applies even to mortgage products that should allow for lower credit ratings.
If you’ve scored 620 or below, building up your credit score makes more sense before going house hunting.
Keep current credit cards open. Then, pay your bills on time. These are some practical ways to strengthen your credit score.
Get free copies of your credit information from Experian, Equifax, and TransUnion. This will allow you to dispute any errors that could hurt your score.
2. Understand downpayment requirements.
The down payment you need to pay will depend on the type of mortgage you choose and, of course, the lender.
Some lenders will need as little as three percent from first-time homebuyers with excellent credit. But, saving even for a small down payment can be challenging. For example, you’ll need to put down $7,500 on a $250,000 home.
So, use a down payment calculator to determine costs. The resulting figures should help you decide on a goal. Lastly, set up automatic transfers from checking to savings to get started.
3. Buy adequate home insurance.
Car insurance protects against vehicle theft or damage due to a collision. Home insurance, which offers financial relief, works the same way. This product covers damages caused to your residential property or personal belongings due to natural phenomena or other events.
Lenders will require homeowners insurance before closing mortgage deals. You want to make sure you get a product that will meet the bank’s coverage requirements. It should be enough to pay for the cost of rebuilding a home.
The path to homeownership can be challenging. But persevere, do your research, and prepare always. The house you’ve always wanted is worth it.