Buying a house remains a major milestone in one’s lifetime. However, the reality is that more U.S. households live in rental homes. The reason we have more renters than homeowners could be a lack of information, while others consider that their current income is too low to finance the dream of building or buying a new home.
It is common knowledge that buying a home takes a huge financial commitment. Nevertheless, the question remains, how much do you need to make to buy a house?
For us to answer this question, we need to understand the costs associated with purchasing a house.
Understand the Homebuying Costs
When it comes to purchasing a property, a majority of new home buyers think that the total cost of property ownership is the amount asked by the home seller. However, the reality is that there are several costs other than the amount asked by the home seller. Here is an overview of the costs of buying a house.
- The Down payment: when buying a house, one of the biggest expenses from the onset is your property down payment. Regardless of the amount you are earning, you should start saving for the down payment earliest possible. A majority of mortgage lenders will require up to 20% down payment. However, some home-buying programs require zero down payment, while others will require a low down payment, as low as 3.5%.
- Lender Based Costs: When you apply for a mortgage, the lender will apply different charges payable by the borrower. For instance, you may be required to pay an origination fee, mortgage underwriting fee, appraisal fee, and a host of other charges. Make sure you have a clear understanding of what these costs will be before choosing the mortgage lender. The reality is that some mortgage lenders will waive some of these costs, while others charge different rates.
- Transfer of Ownership Fee: This is one of the often, overlooked fees when purchasing a property. You will see charges for the title search, title settlement, and title transfer fees.
- Private Mortgage Insurance: depending on the mortgage type, the borrower might be required to purchase the mortgage insurance. Mortgage insurance is a requirement on all the FHA and USDA loans.
- Mortgage Interest: An obvious cost is an interest paid on the mortgage you have borrowed. The interest rate depends on different factors. However, the obvious is the credit score. You will find that buying a house with bad credit attracts a high-interest rate, compared to interest rates charged to a borrower with a solid credit score.
Understanding the above costs will help in estimating how much you need to buy a home in Utah. The beauty is that there are important tips to help in keeping the costs associated with buying a house at the lowest margins. So, how can you buy a property at cheaper rates?
1. Work on your Credit Score
Before you think of filling the mortgage application form, the first thing to do should be checking your current credit score. The reality is that buying a house with bad credit can get tough. Consider that mortgage lenders will conduct a credit report check before determining the interest rate on your mortgage. With a high credit score, you could negotiate a lower interest rate on a house-buying mortgage.
2. Evaluate the Available Home Buying Programs
Different home buying programs are available in Utah. The terms and conditions vary from one mortgage option to another. Let us review the different home buying programs highlighting what they mean to the mortgage borrowers.
- The FHA Mortgage: The Federal Housing Administration backs the FHA mortgage. The mortgage offers friendlier terms and conditions starting with a low down payment requirement.
- The USDA Mortgage: The United States Department of Agriculture gives zero down payment mortgages to borrowers who qualify their criteria.
- The VA Mortgage: Veterans Associations backed mortgage allows qualified borrowers a zero down payment mortgage.
- Conventional home loans: The conventional home loan requires a high down payment of up to 20% while the qualification criteria are stricter compared to the optional mortgage options analyzed above.
The FHA, USDA, and VA mortgage options are available to qualifying members and provide a cheaper alternative.
3. Seek Professional Advice
When it comes to the financial aspect of buying a new home, it is important you seek advice from qualified experts. Approach an experienced loan officer for advice on the best mortgages. The expert will take you through available mortgage options, advising you on the qualification criteria. Seeking professional advice is an important step especially when it comes to ensuring that you are making informed decisions.
4. Seek Pre-approval From Multiple Mortgage Lenders
Now that you understand the different mortgage options available, you have verified that your credit score meets the minimum requirements, it is time to seek mortgage pre-approval. However, never make the mistake of wanting to apply with just a single mortgage lender. Visit different mortgage lenders in your area and apply for pre-approval. Look at the interest rates and the total cost of the mortgage. The objective is to apply for a mortgage that is cheaper and at a lower interest rate.
No matter how much you are earning, you can afford to buy a house in Utah. However, the important consideration is making sure you take into consideration the tips shared herein.