Essential Tips for Landing Your Dream Home
As a veteran who is accustomed to moving from place to place, you may be looking forward to putting down roots in a house you can finally call your own. Though exciting, the home-buying process can be difficult and overwhelming. The American Legion Department of Connecticut are a few ways you can simplify it and possibly make purchasing a home more affordable.
Start Saving Money
Regardless of a lender’s down payment requirements, you will need a good sum of money for things like closing costs, moving expenses, installation fees, etc. Closing costs are substantial, ranging anywhere from 3% to 6% of a home’s purchase price. For example, if you purchase a home for $200,000, you’re looking at paying between $6,000 and $12,000 in closing costs alone. At a minimum, you should have between $15,000 and $20,000 saved before beginning your search.
Boost Your Credit Score
Regardless of what type of loan you choose to go with, you will need a decent credit score to obtain approval. The most flexible lenders accept applicants with scores that are in the mid-500s, while conventional mortgage lenders require scores of at least 620. Most VA mortgage lenders require a 620 as well. If your score doesn’t meet the minimum requirements for the type of loan you want, you will need to improve it before applying. You may want to focus on bolstering your score regardless of what it is, as a better score can get you a lower interest rate.
Make Yourself More Attractive to Lenders
Though sizable savings and a good-to-excellent credit score can go a long way toward impressing lenders, you can do more to increase your borrowing power. Pay down your debts as much as you can without dipping into your closing savings, boost your income, find ways to save, and get preapproved.
Explore Your Lending Options
Eventually, you will need to apply for a home loan, but the question is, who should you go through? As a veteran, the VA is the most obvious option. Per the U.S. Department of Veterans Affairs, VA home loans come with several benefits, including a zero down payment option, limited closing costs, loose credit requirements, and no PMI requirements. However, there may be instances when another type of loan is a better fit. Some additional lending options to consider are as follows:
- FHA Loans: Though not as cost-effective as VA loans, FHA loans are great for first-time homebuyers who have less-than-stellar credit and can only afford a small down payment. You may consider an FHA over VA loan if your score is less than 600.
- USDA Loans: USDA loans are those issued by the U.S. Department of Agriculture. They require zero down and are to be used to secure mortgages for property in nonurban areas.
- Conventional Loans: Conventional loans are the most issued mortgage loans in the U.S. They are not backed by the government and, as such, have stricter lending requirements. However, if you meet them, you may be able to secure great terms and rates.
Regardless of the type of loan you choose, make sure that you clearly understand the terms. Carefully consider the APR, interest rate, terms, and payments before agreeing to anything. If you’re looking for a VA loan, carefully explore your options and familiarize yourself with current VA fixed mortgage rates. Rates may fluctuate based on your current credit score, home location, and type of residence.
Plan for the Move
Even when you have yet to find the perfect home, it’s wise to prepare a moving plan beforehand. Doing so allows you to pad your budget accordingly, and it helps make for a more organized move. If you plan to hire movers, reach out to professional moving companies to get an idea of what a move would cost. Now is also a good time to start packing up some of your belongings, even if it’s just items you don’t use all the time. Lastly, prepare a checklist that you can refer to as you get close to a moving date. Items should include
- Connect with utility and internet providers
- Log your change of address with the USPS
- Find a highly rated locksmith who can rekey your doors
- Checking out local schools
Buying a home is the epitome of the American dream. By referring to these tips, you can remove some of the hassle from such a major purchase and life milestone. In doing so, you will be closing before you know it.