4 Numbers That You Must Know When Buying a House
Buying a single-family home can be a stressful experience, even when you have purchased and sold a home before. There are so many moving pieces that you have to understand. Knowing and understanding the numbers below helps you move through the home buying process with ease.
1. Your Credit Score: You simply cannot buy a home without knowing your credit score. Credit scores range from 300 to 850. Anything over 700 is considered a good score with most Americans landing in the 600-750 range. You can buy a home with lower scores, but it will affect your next number, your interest rate.
2. The Interest Rate: The interest rate is the amount of interest you pay on money borrowed from a bank or other lender. In 2020, an interest rate of three to four percent on home loans is available to those with good credit, but that rate could increase to five percent or more for those with less than desirable credit or previous bankruptcy. Interest rates are actually very low right now. In comparison, mortgage interest rates hit an all-time high of 18.63 percent in October 1981.
3. Your Pre-Approval Amount: Once you talk through your finances with a lender, they will tell you what amount you can spend on a house, also known as your pre-approval amount. Keep in mind that the number is the maximum amount you can spend. You do not have to spend that much. In fact, go over your monthly budget and long term goals. Does the monthly payment on the max amount you can borrow work with your plans? If not, buy a house that fits into your budget better.
4. The Radon Level: While everyone knows (or should know) that a home inspection is an important step in buying a house, not everyone is as familiar with the radon test. Radon is a colorless, odorless gas that causes lung cancer. It is in the ground and can rise up through the foundation of a home. Radon is located in pockets throughout the United States, meaning it may be in your home, but not your neighbor's. A test is a simple, overnight test, but knowing the radon level is essential to your safety. High levels can be lowered with the installation of a radon mitigation system.
If you're ready to buy a single-family home, knowing your numbers and working with a licensed real estate agent is key.