April 16, 2019

It's like an investment you can live inside.

Achieving home ownership is a dream for many, but it isn't for everyone. Today, there are a growing number of obstacles for home buyers, including higher credit score standards and increased credit restrictions. If you’re thinking about buying a home, here are some items to consider.  

Know your credit.

Your credit history is an important factor when applying for a loan. Most lenders rely on the Fair Isaac Corporation (FICO) credit score or the Vantage Score when determining your loan qualifications. This score reflects how well you manage your debt and is calculated using data from your credit report. A low credit score will result in a higher interest rate on your loan. If your credit score is low, you may want to delay buying a home until you can improve your score. There are a number of things you can do to help your score, including paying your bills on time, only opening lines of credit you need and keeping your credit card balances below half of your available credit.  

Determine what you can afford.

A good rule of thumb: Keep mortgage payments under 30 percent of your monthly income. If it's higher than 30 percent, you may be better off renting for a while. Use our mortgage calculators to help crunch the numbers.  

Consider all the costs of home ownership.

Your Bank Iowa lender will help you review costs like fees, closing costs, points, homeowner insurance and taxes. But you should also consider additional costs like repairs and maintenance. As a homeowner, you are responsible — there won't be a landlord to call!  

Plan for the future.

A home is a long-term investment, so if you plan on being in an area only a short time, renting may be a better option. Typically, if you plan on staying in an area less than five years, buying a home may not be worth the cost of the investment with all the financing, closing costs and other expenses associated with owning a home. If that's the case for you, focus on paying down debt and building savings instead.  

Be aware of first-time homebuyer programs.

Contact Bank Iowa or a state housing agency to see what programs might be available. Sometimes these programs offer better interest rates and terms.  

Do your homework.

The differences in mortgage types can make it difficult to know which one will best fit your individual needs. Be sure to work with an experienced mortgage lender who has your best interests at heart and who will take the time to help you understand the pros and cons of all your options.