In the wake of the housing market collapse, the prospect of owning property became more affordable. However, consumers still need to ensure their finances are in top shape before they try to make the transition to homeownership.
Although a cash advance loan can help cover a mortgage payments following a financial misstep, this loan option should not be part of your long-term repayment plan.
Mortgage rates are currently hovering near all-time lows. In fact, average fixed mortgage rates have been below 4 percent for all but one week so far this year. Paired with property values which depreciated more than 30 percent in some areas following the real estate bubble burst, nationwide housing affordability increased during the third quarter, according to a report from the National Association of Home Builders.
“The latest housing affordability data is good news on two fronts, because it shows that the share of homes affordable to median-income earners has risen even as home prices have continued to gradually recover from their recession lows,” said NAHB chairman Barry Rutenberg. “This is primarily due to the fact that mortgage rates are now lower than we’ve seen them since the HOI was initiated more than a decade ago.”
During the third quarter, roughly 74.1 percent of properties sold were affordable by households making the national median income of $65,000, the report said. This was an improvement from 73.8 percent in the second quarter.
Meanwhile some areas were more affordable than others. Last quarter, the most affordable housing market was the Ogden-Clearfield area in Utah, where 93.2 percent of homes were affordable the median household income in the area of $71,500.
In contrast, the most expensive housing market was in the New York City and its surrounding area. In the Big Apple, just 28.5 percent of properties sold during the third quarter were affordable to the median income in the area.
Preparing Your Finances For Homeownership
No matter how affordable homes are in your area, buying property is a major financial undertaking. Because of this, you need to make sure your finances are in the best possible shape before you even think about starting your home search.
One of the most difficult parts of buying a home that holds a number of prospective borrowers back from making the transition is saving money for a down payments. Conventional down payments are roughly 20 percent of a property’s value. This upfront payment basically acts of collateral and shows a lenders how serious you are about owning a home. Meanwhile, if you make a considerable down payment, you may be able to qualify for more favorable terms on your mortgage.
Get Your Credit In Check
Another major factor lenders use to determine your eligibility is your credit score. This number gives them an idea of how well your handle credit. Simply put, a higher credit score demonstrate you are more responsible when it comes to paying off your credit, while a lower score could indicate that you made a few missteps in the past.
To get an idea where you stand, order a copy of your credit report from one of the major credit reporting bureaus: TransUnion, Experian or Equifax. Under federal law you are entitled to one free copy form these of the companies every year, so don’t worry about the expense.
Check this document closely for any errant marking that could have a negative effect on your credit standing. Roughly 70 percent of credit reports contain incorrect information, so make sure you check it closely.
If you spot any issues, bring this up with your lender and credit reporting bureau immediately. This could ensure your credit standing gets back to where it needs to be and get you one step closer to homeownership.