Things to Handle If You Are Soon to Be a Homeowner

If you’re shopping around for your forever home, making the change from a simple monthly rental transaction can be daunting. There’s so much more to think about, and it’s usually all wrapped up in figures – figures with a scary monetary value.

Not to worry. Read on for your guide to the things you’ll need to put in place before you get handed any keys.

Mortgage

Gaining a mortgage can take a little bit of prep before you approach a lender. Having a few things in place will not only make you more likely to gain a mortgage, but extend your borrowing power, allowing for a bigger offer.

The first thing your lender is sure to do is to look at your debt-to-income ratio or “DTI”. This is the amount of your monthly wage that is going towards your minimum debt repayments. You’d be better off wiping any debt you have, either with an installment loan, a balance transfer card or by refinancing an auto loan.

Raising your credit score can offer you a lower interest rate, and thereby a slightly larger loan. Check your credit reports, stay on top of your payments, and avoid opening too many new accounts to help raise your credit score.

You can also show additional income, which can offer a lot of surprising options. You can show proof of income from rental properties or investments, alimony or child support, and even social security income and money earned from a side business or part-time job. However, you have to have been at this part-time job or side business – and earning – for the last two years.

You can also add a co-borrower. A co-borrower with strong credit and a steady income can go a long way to convincing a lender that you can afford your mortgage, as the monthly payments will be split and easier to handle.

A co-borrower can be a spouse, domestic partner, friend or relative, but it cannot be someone just doing you a favor. This is a contract that will put their name on the house. They will be expected to contribute to the mortgage.

Homeowners insurance

For homeowners it is mandatory to have insurance to gain a mortgage. Lenders will require that you offer proof of coverage for the full or fair value of your property in order to be approved.

Homeowners insurance will cover damage sustained to your home’s interior or exterior, personal liability for damage and rental for a hotel or temporary property if your home needs to be repaired or outright rebuilt.

The details of what homeowners insurance will cover can change with the policy but the main afflictions covered include damage due to fire, lightning, hurricanes and vandalism. Look up the area you are moving to and look into extra cover for earthquakes, hurricanes, and flooding if you think the area is prone to them.

The contents of your home will also be covered, including clothing, furniture, appliances, and most other contents. If your home is afflicted by one of the events covered in your policy, you will typically be reimbursed for 50-70 per cent of the amount the house is insured for.

You can take a look at comparison websites and shop around to make sure you’re getting the best deal.

Home appraisal

You will need an appraisal to be sure of the price of the property you are buying. Mortgage lenders are less likely to accept to fund your move if it turns out the purchase price is higher than the home appraisal says it’s worth. It’s designed to make sure that lenders don’t fork over too much money for a building that isn’t worth it. If that’s the case, you will have to foot the bill for the difference between the two figures, or the transaction won’t happen.

The appraisal will ensure that your prospective home’s value matches the home’s condition, it’s age, where it is and what features it offers like number of bedrooms and bathrooms. An inspection will look at the condition of the roof, any exterior hazards and damage, any drainage systems, the condition of the basement, plumbing systems, and much more.

Homeowners insurance will also require an appraisal which is made for the contents of the home. Your home contents, including furniture, jewelry, tech, antiques, etc. will all be recorded in an itinerary to establish value and keep as proof of value should the worst happen. However, you will only be covered up to a preset limit.

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