5 New Year’s Resolutions for Aspiring Homebuyers

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• Make Buying a Home Your New Year’s Resolution •

New Year’s resolutions don’t only apply to health and wellness. Resolutions can go beyond drinking more water or reading more books to preparing for a significant financial purchase, such as buying a home.

In this endeavor, preparation is key — so you must take smart steps to ensure the best financial shape before your big purchase.

Here are five New Year’s resolutions for aspiring homebuyers.

5 New Year’s Resolutions for Aspiring Homebuyers

1. Work on your credit score

Your credit profile is a significant factor in a mortgage approval. The higher your credit score, the better rate you will qualify for. A great credit score can lead to substantial savings over the course of your mortgage. Today’s mortgage rates are still low, but there’s still a considerable difference between a 3 percent and a 4 percent rate.

Let’s take a look at an example. If you’ve been offered a mortgage loan for $300,000, with a fixed interest rate of 4.5 percent and 30-year term, you will end up paying a total of $547,220 with a monthly mortgage payment of around $1,520. If you had the same $300,000 loan at 3.5 percent interest, the total cost of your investment would be $484,968, with a monthly payment around $1,347.

While the difference in the monthly payments may not sound significant, that 1 percent variance in interest rate could equate to a substantial difference in the total amount paid over the course of your loan. At 4.5 percent interest, you’d spend $62,000 more in interest than you would at 3.5 percent.

2. Reduce your debt-to-income ratio

One of the things that your lender will look at when deciding whether or not to issue a mortgage is your debt-to-income ratio, commonly referred to as DTI. Your DTI is simply the sum of all of your monthly debt payments divided by your gross monthly income.

There are two ways to lower your debt-to-income ratio. First, you can increase your income. That could mean getting another job, asking for a salary increase, or starting a business. The more you can increase your monthly income (without at the same time raising your debt payments), the lower your debt-to-income ratio will be. The second way to lower this ratio is to simply pay off your debt.

3. Save up for a down payment

Depending on the type of loan that you plan to apply for, you’ll need to save for a down payment plus additional 3 to 5 percent for closing costs. Since we’re talking about accumulating thousands of dollars, you have to make some room in your budget to ensure your goal is met. That means you’ll have to earn additional income, cut back on expenses, or both.

In addition, a larger down payment will result in a lower loan-to-value ratio, or LTV. This key measure makes you a less risky borrower to lenders, enable you obtain a more competitive interest rate, and help avoid fees, such as private mortgage insurance.

4. Understand your finances inside and out

Before you begin down the path of homeownership, you’ll need to have a solid understanding of your income and finances. When you start to shop for a home, you will be required to obtain a mortgage pre-approval letter from your lender. This letter will provide an estimate of what you can comfortably afford to spend. Before you become pre-approved, you’ll need to gather financial information, such as:

  • Pay stubs
  • Bank statements (last 2-3 months)
  • Certain tax documents, including your two most recent W-2 forms
  • List of monthly debts (rent/mortgage, car loans, student loans, credit cards)

5. Find the right real estate agent

The last resolution for a successful home purchase is for you to find a real estate agent. Many agents like to meet with new clients early in the sales process to set them up for success. The right real estate agent can not only help you find the best home but can also act as a trusted advisor. Your agent has walked this road more times than any of your friends or family, so lean on them to help make sure your transaction goes smoothly.

The Bottom Line

No one has your back like a Reali agent. Whether you’re buying or selling, our trusted local agent advisors are always here to help unlock the best path to your next home. Have questions? Call us at (858) 880-0195 or email portia.green@compass.com to get started with Reali today.

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About The Author
Portia Green, REALTOR®

Portia Green is a highly experienced full-time REALTOR® specializing in the representation of Sellers, heralded by her clients as data-driven and an effective negotiator. Producing $25M total in residential sales volume, Portia's goal is to help her clients achieve the best results when selling their homes and to make their experience an enjoyable one. She has successfully sold real estate since 2008 and has gained an in-depth knowledge of local real estate markets & seasonal trends. Portia has achieved a 100% customer satisfaction rating and wants to share her expertise & personal service with you in the sale of your home. When listing your home with Portia Green and Compass, you'll receive the hands-on service you need and desire. Portia will help you manage the entire process of selling your home from pricing, preparing and staging the house, to marketing, negotiating offers, inspections, all the way to closing. She will recommend skilled vendors for any job needed, personally host Open Houses, and ensure that all showings are accompanied. At Compass, Portia offers a wise no-nonsense way to sell your home for the best price and the least hassle. With a keen eye for staging & preparing listings to maximize Buyer appeal, all of Portia Green's listings are professionally photographed using HDR (High Dynamic Range) photography to provide the highest quality photos in the industry. Professionally printed marketing materials are prepared for all Open Houses. We also capture a 3D scan of your home that creates an interactive walkthrough online along with a custom-designed floor plan and targeted digital marketing campaigns on Google & the most popular social media channels. Compass participates in the Multiple Listing Service, which is the local real estate database of homes listed for sale that all REALTORS® use in helping their Buyers find houses. Your home will appear on every real estate website, in its best light, making a stunning camera-ready debut. Portia Green's home valuation expertise and extensive experience in comparative market analysis will help price your home accurately. She has refined her skills to help you pinpoint which features of your home will result in more showings and better results. Her mantra is for you to be ready to sell your home and feel good about that first. Portia knows that home inspectors always find a problem; that drones take some of the best photos in town; and that her eyebrows will grow to the floor in the time it takes her to read everything that's happening with your HOA, but that doesn't mean she won't do it anyway. Eyebrows be damned. You'll always need a place to unplug, connect, dream, grow, or just be yourself. That makes what Portia does even more meaningful. She’s ready to go the extra mile to help you find just the place. Whether you're selling your very first home, offloading an investment property, or want a vacation getaway with passive income, she is attentive to the details of every home sale. Portia helps busy people navigate this crazy real estate market like a pro, so don't be shy. Every great relationship starts with free advice and a friendly chat. Ask as many questions as you need to. Selling houses is her jam! www.portia.realtor