If your goal for 2019 is to buy a house for the first, or fifth time you need to start getting your finances into tip-top shape. This will make your life less stressful in the long run as you enter into the process of purchasing a home.
Here are 7 financial tips to prepare for buying a home:
Learn the Costs
Down payment, earnest money, home inspection, closing costs, moving expenses. When saving to purchase a home, take all of this into consideration. Many expenses can be negotiated in the sales contract for a seller to pay, but it’s not a guarantee. Schedule an appointment with a real estate agent now to learn what the real cost of buying a home will be. It’s better to be prepared than to be surprised.
Here are 7 financial tips to prepare for buying a home:
Learn the Costs
Down payment, earnest money, home inspection, closing costs, moving expenses. When saving to purchase a home, take all of this into consideration. Many expenses can be negotiated in the sales contract for a seller to pay, but it’s not a guarantee. Schedule an appointment with a real estate agent now to learn what the real cost of buying a home will be. It’s better to be prepared than to be surprised.
Start a New Savings Account
You have your rainy day savings account, now it’s time create a new house specific account. This helps you easily track how much you’ve saved towards your down payment and closing cost for a new home. Transfer money into the account from your original savings account, but don’t move money around too much. More on that later.
Stop Using Credit Cards
If you’ve already taken steps to get pre-approved it’s important to not make any dramatic changes to your credit. This means not increasing the balance on your credit cards for fear of pushing your debt utilization ratio over 30%. Even before your pre-approval, you will want to slow down your credit card purchases so you have a debt ratio well below 30% when you talk with a mortgage broker. If you haven’t been pre-approved yet, ask your real estate agent for a referal to their trusted mortgage expert.
Maintain Several Credit Lines
While you don’t want to increase your debt, you also want to have multiple lines of credit. In most cases, you won’t be approved without three credit lines. This includes credit cards, student loans, car loans, etc. History is important and all of your credit accounts should at least a year old, preferably more. If you’re thinking of purchasing a home but don’t have multiple credit lines, it’s time to open a new account. Use this new account to buy gas or groceries, something you can easily pay off at the end of each month.
Leave Money Where It Is
As you get closer to purchasing your home, it’s important to stop moving money around. You’ll need to provide several months of bank statements when you apply for a mortgage. Shuffling money around makes a paper trail longer and harder for you to supply to your mortgage broker. While moving money around won’t disqualify you for a loan, it will make your life more difficult.
Review Your Credit Report
When you’re ready to start the home buying process it’s important to review your credit report for any issues. If you find any inaccuracies, file a dispute with the reporting agency. You may not find any inconsistencies but pulling a credit report allows you to see where you stand and what you may need to work on to be able to get approved for a mortgage. If you know you have strong credit, wait until about 3 months before you apply for a mortgage to give you time to fix any inaccuracies. If you tend to pay bills late, pull a report 6-9 months before you apply for a mortgage so you know what needs to be cleared up.
Build Your Savings
Cash is king. Even if you already have enough for a down payment, keep on saving. These savings will help you out with surprise projects after you purchase your home. Or, you can apply more cash to your down payment to keep your monthly cost low. Regardless, as you work your way toward home ownership continue to build your savings.
Get out there and get saving! Contact your real estate agent to schedule an appointment to go over the cost of home buying and ask for needed referrals.
You have your rainy day savings account, now it’s time create a new house specific account. This helps you easily track how much you’ve saved towards your down payment and closing cost for a new home. Transfer money into the account from your original savings account, but don’t move money around too much. More on that later.
Stop Using Credit Cards
If you’ve already taken steps to get pre-approved it’s important to not make any dramatic changes to your credit. This means not increasing the balance on your credit cards for fear of pushing your debt utilization ratio over 30%. Even before your pre-approval, you will want to slow down your credit card purchases so you have a debt ratio well below 30% when you talk with a mortgage broker. If you haven’t been pre-approved yet, ask your real estate agent for a referal to their trusted mortgage expert.
Maintain Several Credit Lines
While you don’t want to increase your debt, you also want to have multiple lines of credit. In most cases, you won’t be approved without three credit lines. This includes credit cards, student loans, car loans, etc. History is important and all of your credit accounts should at least a year old, preferably more. If you’re thinking of purchasing a home but don’t have multiple credit lines, it’s time to open a new account. Use this new account to buy gas or groceries, something you can easily pay off at the end of each month.
Leave Money Where It Is
As you get closer to purchasing your home, it’s important to stop moving money around. You’ll need to provide several months of bank statements when you apply for a mortgage. Shuffling money around makes a paper trail longer and harder for you to supply to your mortgage broker. While moving money around won’t disqualify you for a loan, it will make your life more difficult.
Review Your Credit Report
When you’re ready to start the home buying process it’s important to review your credit report for any issues. If you find any inaccuracies, file a dispute with the reporting agency. You may not find any inconsistencies but pulling a credit report allows you to see where you stand and what you may need to work on to be able to get approved for a mortgage. If you know you have strong credit, wait until about 3 months before you apply for a mortgage to give you time to fix any inaccuracies. If you tend to pay bills late, pull a report 6-9 months before you apply for a mortgage so you know what needs to be cleared up.
Build Your Savings
Cash is king. Even if you already have enough for a down payment, keep on saving. These savings will help you out with surprise projects after you purchase your home. Or, you can apply more cash to your down payment to keep your monthly cost low. Regardless, as you work your way toward home ownership continue to build your savings.
Get out there and get saving! Contact your real estate agent to schedule an appointment to go over the cost of home buying and ask for needed referrals.