You’ve probably heard it repeated time and time. Buying a home is extremely important. Purchasing a home lets you build wealth! Buying a home helps you settle down!
In the long term, owning the place you live is more affordable than renting. However, you might not know when it’s the right time to buy a piece of real estate. And that’s okay!
In this article, we’ll talk about what you need to buy a house. Then, we’ll go over how much credit history you should have and what your ideal credit score should be.
How Much Credit History Do You Need To Have?
That’s a great question! Generally, mortgage lenders will want you to have two years of excellent credit history. That means two years of making payments on time, lowering your debt, and not taking out too many credit accounts.
How High Should Your Credit Score Be?
That’s quite simple. On top of having more than two years’ worth of excellent credit, you want a credit score of 620 and higher when applying for conventional mortgage loans!
Depending on your situation, that sounds a bit difficult. But as long as you’re making payments on time and lowering the amount of debt you own, you should be okay!
What’s a Reliable Source of Income?
That’s a great question, and the answer is quite simple. When buying real estate, you want to ensure you have a reliable source of income. That means you need a job that gives you enough income for you to live comfortably and allows you to stay afloat.
Mortgage lenders will only give you a mortgage if they see you have a sustainable source of income.
Do You Need 20 Percent of the Home Price for a Down Payment?
You might have heard you need 20 percent of the house purchase price for a down payment. This is the case for conventional loans.
However, some loans will allow for 3.5% of the purchase price and a willingness to pay a little extra for private mortgage insurance.
The bottom line, you still need to save before you even consider buying a home!
What is Private Mortgage Insurance?
To explain Private Mortgage Insurance, we contacted Jason Redman, a Mortgage Lender at Cardinal Financial, to give you the definition straight from a mortgage lender.
“Private mortgage insurance, also called PMI, is a type of mortgage insurance you might be required to pay for if you have a conventional loan.
Like other kinds of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan.
PMI is arranged by the lender and provided by private insurance companies. PMI is usually required when you have a conventional loan and make a down payment of less than 20 percent of the home’s purchase price.”
The monthly premium is usually added to your monthly loan payment. The typical cost of private mortgage insurance is usually only .58 percent to 1 percent of your loan amount.
Where Do You Go From Here?
The answer is quite simple. Go home-hunting! Figure out which type of home fits you best.
Start by searching local listings in your area. And then find a Realtor® who can help you throughout the home buying process.
Happy house hunting!