Getting married is often one of the biggest decisions a person can make. Once the date has come and passed, the real decisions start coming. Often newly married couples want to start their lives together in a new home. This is a great way to build wealth and establish your new family as a newly married couple. Before you embark on this journey you need to find out the basics so you make the right decisions for your future. Here are 10 tips you need to know before you begin.
1. Typically both Credit Scores are used when applying for the loan: Your loan program is based off of the lower score. So if one spouse has good credit, and the other has bad credit, everything will be based on the lower. There are ways around this, but it can make it harder to get a loan.
2. Both spouse’s debts are combined to determine what you can afford: You will need to pull a joint credit report to get an accurate figure on what you can afford. Anything with more than 10 months left of payments on it will determine the size of loan you qualify for. It is important to get an idea of student loan payments, older debts, credit cards, anything that has been co-signed for. All of these things will affect your loan amount.
3. Know what you can afford: Housing websites often show you just the housing payment with interest only. The payment is just the beginning. You will have to pay Taxes, (Probably 2% or so of your homes value), Insurance, Private Mortgage Insurance (depending on the loan), and HOA dues if your house has a homeowners association. Houses in the $150,000 range can often have over $500 a month in extra bills. You need to look at all payments combined when shopping for a house.
4. Get Prequalified before you go house shopping to avoid heartache: Often times couples have there eyes set on the dream home. You need to get prequalified to see what you can currently afford. Know the numbers and budget before you go shopping. It is an exciting event and people often will go off of their emotions and not the facts. It happens quite frequently that a couple will submit an offer on a house, only to have financing fall through and lose the house. Do not let this happen to you.
5. Avoid getting a home loan quote online: Forms that are filled out online often get sold to over 4 companies. If you feel out a form online, you will typically get a minimum of 20 calls all claiming different rates and programs. This can often discourage homebuyers. Find two local Mortgage Bankers and have them do a thorough review of your situation. Then you can compare their Good Faith Estimate for the best options for the best deal.
6. Avoid making any big purchases on credit before we buy houses Houston: Countless times we have seen couples purchase cars or furniture on credit before they apply for the house. This will have a big impact on the home loan that you will qualify for. If you want to get these things it is often better to wait till after you are in the house and see what you actually need.
7. Have cash on hand when purchasing a house: (I would recommend a minimum of 5% of purchase price). There are several out of pocket expenses that will have to be paid for when you are purchasing. (Ex. $450 for an Appraisal, $350 for an inspection) All of these things will have to be paid for before closing, even if you get seller helping to pay for closing costs.
8. Pick a mortgage loan that works for your situation: There are multiple loan programs on the market today: ARM’s, 15-year, 30-year, FHA, Conventional, VA. Work with a professional to make sure you understand the loan that you are comfortable with and that you understand. Do not be sold into anything you do not understand. I believe simpler is always best. I would recommend a 30-year fixed where you put a minimum of 5 % down. This will give you the lowest payment and allows you the option to pay down your mortgage if you like.
9. Find a home that you want to stay in: If you are not going to stay in the home for at least 3 years, do not buy it. You will spend a lot of money on closing costs, realtor fees, and other expenses if you have to sell it very soon. You will lose more money than you will probably make. Make sure that your house will fit your lifestyle for 3 years.
10. If you are marrying someone who has been divorced, be sure to look at the divorce decree: This is a touchy situation but it is very important. The divorce decree is going to determine if you have any payments for child support, alimony, etc. All of these payments will be factored into how much housing you can afford. It is crucial that you get this information so you know what is going to be affecting your finances in the upcoming years.