Financial Fundamentals for First-Time Homebuyers
Are you getting ready to buy your first home? If this is the case, one of the first steps you should take is to ensure that you are financially prepared for your purchase. Here are a few of the financial fundamentals you'll need to consider before buying a home.
Build Your Credit
Your credit score is one factor in determining which home loan you will qualify for. It also has an effect on your mortgage interest rate. While many factors influence your mortgage application, a higher credit score may result in a lower monthly payment in the long run.
So how do you make sure your credit is in the best shape possible when it’s time to buy? A recent article from NerdWallet lists a few tips you can use as you work to build and strengthen your credit. They include:
1. Tracking your credit and disputing any errors that show up on your reports.
2. Paying your bills on time. This includes making loan payments and paying down any open lines of credit.
3. Keeping your credit card balances low. Paying more than your minimum monthly balance when you’re able can help.
Automate Your Savings for Your House Fund
You may also be wondering how you will meet your down payment savings targets. Bankrate offers a number of tips to help buyers save money, such as looking for down payment assistance programs and ways to save more money faster. As stated in the article:
“One of the best ways to save for anything — including a down payment — is to set it and forget it. If you receive a regular paycheck, ask your employer to direct a portion of that payment into a savings account. If you’re a freelance worker or independent contractor, set up a recurring transfer from a checking account to a savings account to establish the routine.”
You'll also need to know your budget and how much you'll be able to borrow for your home loan as you prepare for your purchase. This is where the pre-approval procedure comes into play.
Pre-approval from a lender lets you know how much money you can borrow for your home loan. And having that knowledge, plus an understanding of your savings, can help you decide on your target price range for a house.
You can then start looking for houses online to see what's available in your area at that general price point. This can help you really understand your options and begin to envision your future home.
For Customized Advice, Build a Team of Professionals
Finally, connecting with trusted real estate professionals is the best way to ensure you're prepared for your purchase. Having industry experts on your side will help you make sound decisions throughout the homebuying process based on your unique goals, finances, and situation. They understand the market and can direct you to the home of your dreams.
If you're ready to start the home-buying process, contact a local real estate advisor today to start assembling your team of professionals.
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