Residence in Turkey is your top priority next year? Congratulations! You’re going to embark one of the most amazing and rewarding experience of your life. You should keep in mind that buying a home or residence is not one day process but when all is said and done, there’re few more nerve-racking things you need to face. We’ll guide you thoroughly with what you need for residence permit in Turkey 2021.
1. Check Your Credit Score
The first thing you need to do even before making an offer on a house or before applying for a loan is to check your credit score. Why checking credit score is important? Because it not only make difference between getting low-interest or high-interest rate, but also put direct impact on how much a bank or lender will actually loan you. You can check your credit score on various websites for example Experience, Equinox, Trans Union. You can also check your own score as much as once a day without affecting your credit, known as soft inquiry. On this flip side, when financial institutions check your credit score known as hard inquiry, typically when you’re applying for a credit card or loan. It’s better to keep hard inquiries to minimum because hard inquiries lower your credit score a few points.
2. Improve Your Credit Score
Once you check your credit score and realized it’s not as high as you had expected tan you need to improve it. There’re few things you can do now that will help raise your credit score so you can capitalize on a great interest rate. If your credit score is low, keep in mind that raising or fixing doesn’t happen overnight. It’s better to start now so when you go to apply for a home loan credit score will be where you want it.
3. Know What You Can Afford
To know how much you can afford simply use an Affordability Calculator. Although these calculators do not necessarily account for all of your monthly expenditures but certainly they’re great tool for understanding your larger financial situation. After finding what you can easily afford, next you can start online window shopping for houses and really begin to narrow down what you want in a house versus what you can comfortably afford. How many bedrooms you want? Are you looking for specific neighborhoods? Do you need a large yard, swimming pool, big deck, man cave, she shed etc? Realizing what you can afford in neighborhood will help keep you grounded and focused on what you actually want in your house versus what might be nice to have.
4. Save Up for a Down payment
Private Mortgage Insurance (PMI) is an added insurance that mortgage lenders charged to protect them in case you default on your loan payments. For homeowners major concern regarding PMI is that they usually cost you hundreds of dollars each month. So, unless you want to pay PMI, you really want to save up for a size able down payment. Typically 20 % down settled with mortgage lenders in order to avoid paying for PMI. There’re some other types of loans as well such as VA loans for those serve in military and qualify, may allow to put down less than 20 % while avoiding PMIs altogether. If you’ve saved size able down payment, you may receive a lower interest rate as an added benefit that will save you tens of thousands of dollars in interest over time. So, saving is important start it now!
5. Build up your Savings
Lenders prefer healthy savings account, assets or other investments that you can use during hard times. What they really don’t like to see is that you’re living paycheck to paycheck. Healthy saving account and other investments help you to establish your future financial independence. It’s also a must item on your checklist of what you need to purchase a home in 2021.
6. Healthy Debt-to-Income Ratio (DTI)
Healthy debt-to-income ratio is another important component that banks and lenders consider when issue loans, and at what interest rate is your debt-to-income ratio. It’s a comparison of your monthly housing expenses and other debts with how much you earn. So you need to know what a healthy debt-to-income ratio is when applying for a loan. The lower your debt is, the better it is, but it shouldn’t be more than 43 %, otherwise you may not qualify for a loan at all. You need to consider two types of DTIs.
The Front-End DTI: This DTI typically include housing related expenses like mortgage payments and insurance. You want to shoot of 28 % for a front-end DTI.
The Back-End DTI: This includes all other debts such as car loans or credit cards. You need 36 % or less for back-end DTI. Pay down your debts to creditors to improve this DTI.
In order to calculate DTI ratio, use this equation for both front-end and back-end DTI.
DTI= total debt / gross income
7. Budget for Hidden or Extra Costs
Along with major costs, there are number of hidden costs that overlooked by home buyers. You can wrapped sales tax and home insurance into a home loan and monthly mortgage but there’re several little things that cannot be comprise into the home buying package and you’ve to paid these from your pocket. Here is the list of extra costs you need to consider when buying home. Remember these items can range in price depending on size, area and cost of house you’re buying.
- HOA fees
- Home Inspection FeeHome updating/ remolding
- Property Taxes
- Home Insurance
- Home Appraisal Fee
- Home Inspection Fee
- Geological study
- Closing costs
- Start fees/ Utility hookup
- Existing propane gas
(Sometimes closing costs can be wrapped into the home loan depending on the agreement with your lender)
(Home insurance and property loans can be paid individually or your lender could include it into your monthly mortgage payment)
8. Don’t Apply for New Credit Card or Close Old Ones
Keep in mind that closing a credit card account will not raise your credit score, neither opening a new credit card before buying is good idea. Infect, closing old credit card account may lower your score. Furthermore, if you’ve an old card that you never use in long time, just ignore it or don’t use it until you buy your new home. Similarly don’t apply for new credit card as your creditors don’t like opening new cards under your name and you may lose some points on your credit score. The worst thing you can do is max out one of your credit cards, even if the limit on the card is low. If such thing happens you credit score may plummet. It is best to tackle your credit cards by paying one with highest interest rate first , then as one gets paid off and focus on the next card until you’re free and clear.
9. A Solid Employment History
All lenders like to see consistency in borrowers. They want their lenders to continue same job for about two years. So, what about people with jobs as contract position, or have irregular work schedules or those who are self-employed? If you’ve inconsistent pay schedule, still you can qualify for a home loan. Bank Statement named mortgage is becoming rapidly popular among lenders as more self-employed or what has been referred to as the ‘gig economy’ has taken off.
10. Know the Difference between Adjustable Rate and Fixed Rate Mortgage
It’s simple to understand the difference between two types through their names. Adjustable rate mortgage starts out as a lower rate than fixed interest rates but then is adjusted each year, typically resulting in a higher rate than a fixed rate. While fixed rate mortgage will never change from the moment it’s locked in.
11. Follow Interest Rates
Knowing what current interest rate is important for property management, whether they are on rise or are they failing? When the economy is doing good Federal Reserve typically raises the interest rate to slow down economic growth in order to control rising costs and inflation. On the other hand when economy is in the dumps the Federal does the opposite. Lower interest rate allures more people to purchase that require loans to stimulate the economy. After three years of bottom of the barrel interest rates, the Federal raised interest rate three times in 2018 and now is projecting to rise three times more in 2019.
12. Know How Much Time You Need to Buy a House
Home buying is a process that needs patience! It’s a time consuming task and depends on individual circumstances and the housing market in your area. However, you can expect some general universal constant about home buying, such as cash offer on a house is usually much quicker than a traditional loan and if there’s a great house at great price in good neighborhood, you better expect competition and added time for a seller to review offers. Depending on the housing market in your area or the season you’re buying in, home buying time can take couple of weeks to more than a year. But after you find your dream home, it can take as little as few weeks to a couple of months on average.
13. Find a Reliable Real Estate Agent
If you’re buying first time, it’s much better to hire knowledgeable real estate agent than doing it yourself. There’re number of ways to find good real estate agent. Some people rely on references from family and friends while others look to online reviews. Both ways gives you best results as your family only refer you an agent with whom they’ve great experience and only those agents rise above others who’re good in their jobs. Right agent doesn’t force you to buy home as quickly as possible to earn a commission but will act as your guide through the home buying process, while having your best interests in mind. Furthermore, instead of giving you false information, good agents tell you straight whether a house is good fit for you or you should keep looking. Experience agents are also expert negotiators so that you get the best deal possible.
14. Find a Mortgage Lender
Few certain things you should keep in mind while searching for mortgage lender. The first thing hit people’s mind is what mortgage rate they can get. Do your homework and find out the best rate because lower the rate the money you save. To check how does that mortgage lender rate compared to other lenders? Check out online reviews, this is the best way to guess the theme pretty quickly of the strengths and weaknesses of the lender and what possible services you can expect down the road. Don’t your lender questions such as how long he takes to close on a house after the offer has been accepted?
15. Get Pre-Approved
Getting pre-approved is necessary part of home buying process but it is important for the buyers to know the difference between typical fast pre approval for a loan and an underwritten pre-approval. The underwritten pre-approval usually takes about 24 hours and includes a credit report, underwritten review, loan officer review and a fraud/compliance review. The basic pre-approval allows you to quickly understand how much you can afford and then make an offer on a house that may have just come on the market. While the fast pre-approval usually covers a credit report and a loan officer review and can be done in less than a couple of hours. Although underwritten pre-approval takes more time than fast pre-approval, but your offer on a house is actually stronger. Ultimately, you’ve to go through the underwritten pre-approval process anyway if you’re planning to buy a house, so it’s better to jump on it from the start.
16. Research Neighborhood You Want to Buy Home In
When you start researching for your future residents begin with variables most important to you. Are you looking for a big house or for good school districts, convenience to commuter options or a specific neighborhood that is friendly? The real estate agent you hire will tell you to figure out the things you absolutely want in your house versus the extra features that you would like to have but not mandatory. Your list helps your agent to only show you properties that really fits on your criteria and save time.
17. Make an Offer on Home
Now you get pre-approved and find the area where you want to live in, the real fun begins! After the necessary preps once you find your dream home, you’ll want to make an offer. There are plenty of things to consider when buying home and hopefully your reliable agent help you through all this process. Market conditions, what type of homes are for sale in neighborhood you’ve selected and at what price, any other competitor all these things help you to determine how you’d like to make an offer. Negotiations needs skill and research so do your research and rely on your agent’s advice so you come to the table prepared.
18. Get a Home Inspection
You’re almost at the end of home buying process. Once seller accepts your offer next you need to get the home inspected to ensure there’re no underlying issues that could cost you money down the road. A home inspection usually a contingency built into the initial offer and your real estate agent help you set this up. However, it is better to hire one who is certified by a national organization.
19. Home Appraisal
Home appraisals are important because home prices can quickly skyrocket when the market is hot. In hot housing markets bank do not like to loan out more money than what a home is worth. A home appraiser will tell you what the home is actually worth for the area for the current housing market but and also directly affects the size of loan the bank will give you. Furthermore, mortgage lender will set the home appraisal so buyer can take this time to focus on other home buying tasks that need to be finished up.
20. Closing and Signing the Papers
Congratulations Real Estate projects in Turkey, on home ownership! The final thing you need to do with the help of your travel agent is map out the last details like where you want to buy and when you should sign the papers to take ownership and handing over the keys.