What to Know about Getting Ready to Buy a Home
Buying a home is a big decision. It can be a great financial choice if you play your cards right. However, it's a huge commitment, and can cause problems if you're not meticulous. Don't forget to speak with a local mortgage expert before buying a home. Thinking about getting the process started? Here's what you need to know.
Check your credit.
Your credit history and standing are very important information to be aware of before you begin the process. Lenders will use this information to determine if you are approved for a mortgage and what interest rate will be charged on a loan.
Creditors (institutions that extend credit) will use your credit history to assess how much of a risk you are to extend a loan to and how likely you are to pay the loan back. This includes factors like income, length of employment, past credit history, amount of outstanding debts, etc. Lenders are the pickiest with home loans because the purchase (and loan) is so large.
Protecting your good credit standing.
The bottom line: repay extended credit in full, on time. Late payments, no matter the amount, are one of the biggest red flags and can tank your credit score quickly. Minimum payments can also cause trouble because they're often small. You won't receive late fees if you pay the minimum, but you also won't be making a large dent in repaying the amount you owe (and interest adds up quickly). Use your credit to your advantage by making a thorough budget and only putting expenses on your credit card you are able to pay off at the end of the month.
Repairing bad credit.
Repairing a bad credit score can take time, but it will rise the more regular, on-time payments are made. You also can contact a financial counselor to assist in creating and maintaining a budget.
Budgeting/Saving for a Home
The key to beginning to build your budget is the right mindset. Financial discussions can often be stressful but go into it with curiosity. Research and look into where you are spending most of your money to find avenues where you can maybe cut back and save. The little things, like making your coffee at home, can add up.
From there, you can begin to budget for your downpayment and mortgage moving forward. It's important to save for the initial downpayment as well as the monthly charges that will continue to occur. Building a home maintenance section into your budget will ensure you have the money moving forward for your home.
Prequalifying for a Mortgage
Prequalifying for a mortgage allows you to see what you could afford when purchasing a home. This takes into account factors like your income, savings, and debt, as well as looking at the current interest rates for home loans. This information can help you determine what monthly mortgage payment and initial downpayment you can afford. It's not a loan guarantee or a commitment to a certain lender.
Have more questions about financial options and downpayment assistance? Click here to get connected to a loan officer about pre-approval.
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