Job, Credit & Downpayment = Homeownership!
Homeownership is a dream for many and achieved by few. The question is what does it take to buy your first home?
First you need a job:
Either work for a company or as a business owner. The exception is if your family is wealthy or if you win the lotto. If that happens to be you then congrats. Otherwise this is common knowledge. Having a job is a requirement of every lending institution. So how much do you need to earn? You will want to be in a range of 28% to a max of 36% of your yearly household income to be used for home ownership. If you make $60,000 per year then you will want to use between $16,800 to $21,600 per year on your mortgage.
With those numbers you can now determine how much home to buy. If you want to be on the high end then you need a home that with your mortgage and taxes will not exceed $1800. So lets crunch the numbers.
- $300,000 home Click → Bronx Real Estate
- 4% interest rate
- 30 Year Term
- $3000 estimated property taxes
These figures will give you an estimated monthly mortgage of $1432.25 plus a $250 per month for property taxes = $1682.25. This is well below the $1800 cap. This is key because you want to be able to afford your home. Also note that if you get a non-conventional loan, you may have to pay a PMI which is mortgage insurance and that would have to be factored in.
Second you need Credit:
You can have a great job but unless you can pay for your home in cash, then you will need to get a loan from a bank. In order to get a loan from a bank you first need a job and then you need good credit. Every bank and lender is different but you would want to have at least 620 credit score. Most banks will require a higher score but there are lenders that will lend to those with lower credit scores. The thing you will want to look out for is your monthly payment and if you can afford to make the payments in the long run.
So how do you improve your credit score?
- Make on time payments
- Have a diverse credit profile
- Don’t carry balance over 20% of available credit
- Long credit history
- Monitor your credit report for inaccuracies
- Get your credit score
- Don’t binge spend
- Monitor Spending
Following these steps will ensure that you are on the right track to have a great credit score. Remember the higher the score the lower the interest rate which = lower monthly payment.
Most people end up getting caught up in the micro spending, credit charging habit that ultimately messes up credit and requires yard sales and storage rooms. Your best option is to practice financial discipline. I don’t mean not to shop at all but I believe there is a time to spend and a time to save. Which leads us to our next topic.
Downpayment:
- Job √
- Credit √
- Downpayment ?
The downpayment is your next step. You will need anywhere from 3.5% to 20% for a downpayment for your home purchase. You and the bank share in the risk. Putting 20% or less is actually a great deal. Could you imagine having to put more down? It would be virtually impossible for the average household to save.
If you want to buy a $400,000 home and want to put down 3.5% you will need $14,000 for a downpayment. Remember anything less than 20% will require a PMI. You will also need money for closing costs.
You can save your way to a downpayment and even ask friends and family for some help as well. You will be surprised how easy and fast saving for your next home can be if you made it a priority.
All this = Homeownership!
Now if you read this article and said to your self, “hey, I have all this in place and I don’t own my home” then you need to start looking around. Prices are amazing and interest rates are extremely low. If you are not quite there yet, don’t worry. Follow these steps and you can be there sooner than you think.
Either way this article is meant to be a basic guide. I hope you found it useful. If you or anyone you know is looking to buy a home Click→ Bronx Homes for Sale.
Joel Rivera
BronxPad Founder
347-601-1551
Disclosure: Remember, the figures used in this article were just examples used to demonstrate how the numbers work. To learn more about lending qualifications speak with your banker or mortgage broker.
anthony rivieccio says:
Although a bit long (because of all the requirements) I thought this was a thoughtful, well,drawn piece!
Secondly, as a professional (and friend) I must add Mr Rivera that your. Website has come a LONG WAY from its orignal days-and becoming I hope , a true network to assist in the coming of future and let’s hope long term capacity of The Bronx
PS. A question if I might? Is our county: Bronx or The Bronx? I recently attempted to file documents for a client at the license bureau and it was rejecte as “The Bronx”?
Administrator says:
Thanks Anthony, I am constantly learning. On the issue of The Bronx and Bronx, the city of New York recognizes our great borough as The Bronx but the post office I believe has it as Bronx which is why when we mail letters we put Bronx New York and not the Bronx NY. The license bureau I think should also recognize it as the Bronx. Good question.