NEW YORK (MainStreet) — Buying your first home comes with equal doses of trepidation and elation with the knowledge that you are sinking your hard-earned money into a single dwelling, possibly for the next 30 years.
Yet the yearning for your very own abode could defeat any remaining feelings of apprehension. Here are some tips to prepare you for one of the largest commitments you will encounter as a tax-paying adult.
Make sure to take all the expenses of owning a home into consideration. Don’t look past your monthly mortgage payment and budget other recurring expenses such as homeowner's insurance, association fees, taxes or private mortgage insurance. Strive to keep all these costs below 30% of your total income, said Jason van den Brand, CEO of Lenda, a San Francisco-based online mortgage company.
If you are purchasing the house with someone else, make sure you know their credit score. Even if you are buying the home with a spouse or a family member you know fairly well, finding out their credit score before you apply for a mortgage can make a difference.
When you apply for a mortgage with a co-borrower, the lender will look at the lowest middle score when giving you an interest rate, he said. There are three major credit bureaus and each one calculates your credit score a little differently. If your three scores are 760, 745, 739, then your middle score is 745. If your co-borrower has a middle score of 700, that is the score that will be used. “This could make a huge difference in the interest rate you qualify for and the amount of your mortgage payment,” van den Brand said.