Getting Finances in order before you buy a home is a very important step in preparation, especially in 2023 when the interest rates are rising whcih makes it more challenging to qualify for a loan.
Your real estate agent, if they are experienced, will sit down with you to get to know you and learn about what type of home you’re looking for, the size and other details. The agent will also ask if you have the downpayment if you find the home of your dreams.
Especially now with interest rates rising, you must have your down payment available and will need to be pre-qualified to afford the home in the price range you feel you can afford. Of course pre-qualification is based on your current employment status and income.
The potential of your purchase is for tens of thousands of dollars worth of investment, which will appreciate over time. And you can’t just walk into a bank and tell them you want to buy a house. There are some financial steps you need to take before you can buy a house, and this article will help you remember some of them.
The first thing you need to do is to examine your current financial situation. What is your credit score like? Your credit score as well as that of your spouse, will affect the mortgage loan you’re able to secure, so if at all possible, improve your credit score before you begin the process of trying to buy a house.
To help improve your credit score, look at all your creditors (the companies you pay each month for products and services as well as your landlord) and try to work out a way to pay down your bills or meet with a debt counselor to consolidate bills and even negotiate with creditors to reduce your debt owed. You might need to make more payments, or you might need to stop using credit cards. Working on your credit score may not be fun, but it will help you qualify for a lower interest payment when you buy a home.
After you work on your credit score, start saving some money. Very rarely can someone put 0% down on a home, unless their credit is excellent. You need to start saving money for a downpayment and closing costs. Look for ways to cut back on your spending so that you have additional disposable income that you can save for your home. A typical downpayment is about 20% of the total cost of the home. You might have to get a second job to generate more income coming in, or you might have to stop eating out multiple times a week, or go without a new home appliance. Sacrifices are always necessary when saving money, but the end result is your goal to buy a home of your own.
Once you’ve reduced your debt, and saved a chunk of cash for a downpayment, go shopping for your mortgage. Alot of homeowners just go to their own bank, but you might be able to get a better deal elsewhere. As real estate agents who they recommend and also inquire with your neighbors and friends. As mentioned, your credit score is going to figure prominently in the interest rate you can get, but you may be able to find reasonable rates in spite of that. When you are approved for a mortgage, you can breathe a little easier because you know that you are cleared for a certain amount of money to spend on your house.
You are also going to need to be patient. If you are serious about getting a home, plan ahead and focus on the end game. Owning a home of your own carries with it a number of responsibilities, and those responsibilities will continue to factor into your lifestyle for 20 to 30 years until you sell the home or pay off the home. Try to think with a long-term mind, and approach your goal with patience as you prepare and enhance your financial house, before you purchase a real one.
Hopefully the pointers provided above about getting ready to buy a house, and getting ready financially, are helpful. If you establish your goals, diligently work toward saving and reducing debt, and keep your nose to the grindstone for the long haul, you will be able to buy your home and secure a sense of great pride and responsibility.