Getting Your Money in Order Before a Home Purchase
The largest investment most people will make in a lifetime is purchasing a home. It’s a huge commitment, but it has many benefits for your family. Preparing for a home purchase is just as important as finding the property itself. Follow these tips to get your money in order before closing day.
1. Look Over Your Credit History
Mortgage lenders will look over your credit history so that they know you’re a good candidate for financing. Correct any discrepancies in your report right now. With a clear report, every lender will have the proper information to quote you a rate. A credit history with a low score will make a home purchase more difficult. Your interest rates will be high, which translates into a larger payment each month.
2. Set a Mortgage Limit
If you sit down with a bank right now, the lender will use a formula to tell you how much you can afford in a mortgage. It’s not always the right number. Only you know the amount that’s comfortable to pay each month. If you’ve paid a certain amount in rent each month, your mortgage should be somewhere around this value.
3. Save and Save a Bit More
Before you buy a home, curb your spending habits. Put as much money as possible into a savings account. A down payment is always necessary with a home purchase.
Connect with a mortgage lender to see how much home you can afford. This is a good time to have your finances in order. If you plan on making a home purchase sooner than later, it’s best not to make any big purchases using a loan or credit card. The focus should be on clearing as much debt as possible to potentially increase your buying power.
4. Learn More About Mortgages
Educate yourself about the mortgage world before sitting down with a lender. Understand the details surrounding rate types, such as fixed versus ARM, and whether or not you need private mortgage insurance or PMI.
Understand the fees involved with closing the home sale as well. Most buyers pay very few fees, but there are charges that you should be aware of. In fact, some of the charges might be paid upfront before your ownership begins.
5. Get Pre-Approved First
The best way to get your money in order before a home purchase is by securing a pre-approved loan first. A bank runs all of your financing options, and you have a potential loan that can be applied to a chosen property. You must simply find a property within your price range. The financing aspect is halfway completed. Some sellers appreciate this detail, which gives you a chance to win out on a bid.
Remind yourself that there’s always another home on the horizon. The properties you looked at over the weekend aren’t the only ones available. Take your time so that you can pick out the right property for your needs. It’s ultimately worth the time and effort.
