You don’t want the frustration of finding your dream home, only to realize you can’t afford it. To prevent such a scenario, keep your credit in check and have enough cash to close, aside from a verifiable income.
Maintaining Good Credit
This shouldn’t be news, but qualifying for a mortgage requires a good credit score. It’s time to review your credit reports, check for errors and get them corrected ASAP, and possibly work with a daily credit score monitoring service for a few months.
You can start improving your credit score by paying off your credit card balances and not using them for about two months ahead of your mortgage application. As well, don’t get any new credit – for example, a car loan or a new credit card – until you’ve closed on the home. And remember that if you’re buying the home with a spouse or a co-buyer, the mortgage provider will consider both your credit scores when reviewing your application. That means all parties involved must work to improve their own credit scores. Don’t forget that to see any considerable improvement in your credit score, you will need at least six months, so the earlier you start, the better.
Saving to Pay Money Down and Prepare for Other Costs
Aside from improving your credit score, you also want to make sure you’ll have enough money to fund your purchase. First off, you should save enough to pay money down – expect this anywhere from 3.5% to 20% of the property’s purchase price. As you work on this, steer away from the volatile stock market. You need liquidity, which simply means you have to be able to use your money anytime. Also, never underestimate the amount you’ll likely need for closing.
Getting Your Documents in Order
Lastly, if you’re about to make an offer on a house, get your papers in order – pay stubs, bank statements, and so on.
There’s no question that buying your first home is an exciting process. But apparently, it’s not all that easy. You have to prepare yourself in many ways but most especially financially. You should also remember that this preparation does not happen overnight, so this purchase will have to be carefully planned out instead of being done in haste. Good thing you now have readily available tools, such as mortgage calculators, that simplify the process for you. Of course, having a trusted real estate agent by your side may also help.
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