Buying a home can be an exciting adventure and the beginning of a new chapter in your life. It can also be very stress-inducing and overwhelming, especially considering the current market. Right now, inventory is low and home prices are still rising, which makes it more of a challenge to buy a house than in previous years. Still, there are some preparatory steps you can take to make your home buying easier and more successful. So check out these 4 things you can do right now to make it easy to buy a house in New Jersey.
1. Improve Your Credit
One of the best things you can begin doing right now to make it easy to buy a house in New Jersey is to improve your credit. So check your credit and start working on getting that credit score up.
“Once you decide to buy a home,” experts advise, “the first thing you’ll need to do is check your credit. This involves getting your credit report from each of the three bureaus (Experian, TransUnion, and Equifax), and pulling your credit score. Your credit determines whether you’re eligible for a mortgage, and it influences your mortgage rate. The higher your score, the lower your rate. Most mortgage programs require a minimum credit score between 580 and 620.”
Those experts also advise beginning this process at least six to 12 months before you intend to apply for a mortgage. That way, you’ll have plenty of time to get your score up if you need to.
And one of the quickest ways for many people to improve their credit score to buy a house in New Jersey involves checking their credit report for errors. These are more common than you may think. If you do find negative errors in your credit report, you can dispute them and have them removed – thus instantly improving your score.
2. Lower Your DTI Ratio
Another credit-related issue you should take care of now to make it easy to buy a house in New Jersey is your debt-to-income (DTI) ratio.
This “ratio is the percent of your monthly gross income that goes toward debt repayment. Mortgage lenders use this percentage to gauge affordability. Typically, lenders prefer a DTI ratio that’s no higher than 36% to 43%, depending on the mortgage program.”
Some lenders, though, do allow a higher ratio, but only if you have certain “compensating factors” such as a very good credit score or a large cash reserve.
Your best bet is to reduce your DTI ratio. So begin now paying off debt, for example, credit cards, student loans, auto loans. You don’t have to be debt-free to buy a house in New Jersey, but less debt makes it easier.
3. Save For the Down Payment and Closing Costs
When you buy a house in New Jersey, you’ll have two pretty substantial upfront costs: the down payment and closing costs. The more you can begin saving toward those now, the better off you’ll be.
Typical down payments range from a minimum of 3.5% of the purchase price for an FHA loan to up to the formerly standard 20% for a conventional loan. And closing costs usually run about “2% to 5% of the loan amount or $4,000-$10,000 on a $200K loan.”
Your lender will want to know that you have the cash on hand (or can access the cash) to cover these costs. “When applying for a mortgage loan, your lender will ask for copies of your bank statements to confirm you have enough in reserves for your down payment and closing costs.” Being able to show that you have it will make buying a house much easier.
4. Get Clear on Needs vs. Wants and Be Ready to Compromise
Another thing you can do right now to make it easy to buy a house in New Jersey is to take the time to get clear on your needs in a house as opposed to mere wants. And then you need to be prepared to compromise.
Knowing what you actually need in a home rather than just want will make the shopping process much easier. You won’t waste time and effort looking at homes that don’t really meet your needs but may have some of the things you want. So take the time early on to draw up a list with must-haves and like-to-haves.
And remember too that buying a house usually involves some compromise. Preparing yourself for this now will make everything easier later on. If, for example, a house doesn’t have quite as much square footage as you’d like, but does have other features you need such as proximity to good schools, you may have to forego the room for the schools.
Bonus: Find a New Jersey Agent You Can Trust
A final thing you can do now to make buying much easier is to find and use a good local agent you can trust. Your agent can help you find the home you need, negotiate a better price, and guide you through the whole complex process. A good place to start to find a good agent is an agency known for knowledgeable, experienced agents. So if you’re ready to begin the process to buy a house in New Jersey, contact us today at 855-966-DEALS.