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5 Ways to Prepare Yourself to Buy a Home in 2019

Buying a new home is an exciting time in life. Whether it’s your first time to buy or even your third or even forth, the ups and downs of the home buying process can be a wild one! A changing Austin market, increasing interest rates and challenging market expectations can leave your head spinning. By preparing yourself, you can get started off on the right foot. 

What can you do to prepare yourself to buy a home in 2019? 

1. Know how much you can afford.

Rather than guessing, speaking to a lender is a great place to start. They can answer the question to ‘How much house can I afford?’ Having pre-approval can help you get you get your search started. 

The last thing you want to do is fall in love with a home that is more than you can qualify for. Talk about disappointment! Know what you qualify for and can afford will give you one more advantage when you are ready to put an offer on a house.

2. What credit score do I need?

Checking your credit score is a smart thing to do. A score of 620 is typically the minimum that mortgage lenders are looking for, though some lenders will go as low as 580 or below.

Average credit score: 620-680

Very good credit score: 680-740

Excellent credit score: over 740

3. Debt-to-Credit Ratio

Knowing your debt-to-credit ratio and making sure your debt isn’t close to half your credit is something to always keep your eye on. Keeping your ratio as low as possible is a good rule to use. To be qualified for a mortgage loan, the Consumer Financial Protection Bureau demands a total debt-to-income ratio below 43%.

4. How much do I need to put down on a house?

The golden rule use to be 20% down, but the national average is averaging 10%. Some people do three percent or even five percent. 

But something to keep in mind, is when you are in a bidding war, someone with 20% down vs 10% is going to have an advantage. Sellers usually go with those that have the most cash brought to the table. 

Also, for anything less than 20% down, you will have to pay private mortgage insurance, or PMI. PMI generally equals 0.5% to 1% of the value of your home loan. For instance, if you take out a $350,000 mortgage, your PMI could range from $1,750 to $3500 a year. And while it doesn’t sound like a lot, this amount is in addition to your mortgage payment. 

 

5. Mortgage rates rising

Over the past two years, we’ve seen a steady climb of mortgage rates. And while they still remain lower than average, you can expect that to change in 2019. 30-year fixed rate mortgages has reached 5.8%, which is something we haven’t seen since 2008. Buyers who have been holding off, are looking to purchase sooner than later. 

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