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How first-time home buyers can prepare for homeownership

 


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Katie Ross 
Community Education and Marketing Manager
American Consumer Credit Counseling

 


While preparing to buy your first home, there is nothing more valuable than organization and planning. Financially, this can be scary, but with the right preparation and research, it’s very manageable. Becoming a homeowner is perhaps the most important life investment for someone to make. 

This bit of advice can help consumers—particularly first time home buyers—financially prepare as they start the process of becoming a homeowner. Take every step you can to make sure you’re financially secure enough to tackle the investment. If you’re planning to buy a home in the near future, here are some necessary steps you should take well before you start looking. 

Do

First-time home owners

 check your credit report
• pay bills on time
• have multiple trade lines
• save
•  a home buyer course

 

Don't

  go in blind
•  misunderstand the process
•  increase debts
•  move your finances around
•  change jobs

 

Do

 Do check your credit report 

Know your credit score. It is the first thing a bank will look at when determining whether or not they will grant you a mortgage. Double-check the report for mistakes or inaccuracies, if there are some, check with the credit bureaus. If you find that your score is lower than it should be to purchase a house, take some time to improve it so that by the time you are looking to buy a house, it’s at the appropriate level.

 Do pay bills on time 

One of the most important aspects in your home buying process is your credit history. Late payments are damaging to your ability to be able to take out a mortgage. Make sure to get on track with your credit cards, utilities, and student loan payments. Set up a schedule and budget in order to pay bills as soon as they are due.

 Do have multiple trade lines 

Lenders like you to have at least three, usually more, trade lines. These can consist of credit cards, student loans, or car loans that have been open for at least a year. If you close any of these lines, it will affect your credit score negatively. 

Do save 

If you have money saved up, you can put down a large down payment, meaning 20 percent or more. The larger the down payment, the more you can save in additional insurances, and it will give you more buying power. 

Do a home buyer course 

Take a first time homebuyer education course. You can find a plethora of valuable information from these courses, many of which are offered online. They provide potential home buyers with detailed information, advice, and budgeting tips on how to purchase a home. With a homebuyer certificate you will qualify for many loan products that you wouldn’t otherwise qualify for. A first time homebuyer certificate is good for two years after completion. 

Don't 

Do not go in blind 

Do your research. There are many factors to consider when buying a home in addition to just the cost. Make sure to keep property taxes, homeowners insurance, utilities, maintenance, fees, and repairs in mind. These costs can add up quickly. Also, be sure to check on interest rates and then determine what the best time to buy is. 

Do not misunderstand the process 

Buying a home is a long and complicated process. Don’t misjudge the significance of each step that’s necessary to take along the way. Take is slow, and understand that it takes time. 

Do not increase debts 

Your credit score is important, but in addition to that, your debt-to-income ratio is crucial for loan approval. The more debt you take on after you begin the loan approval process, you could be in danger of reaching the maximum acceptable debt-to-income ratio which will jeopardize your ability of closing on the loan. 

Do not move your finances around 

While going through pre-approval, lenders look at your most recent bank statements, but they check them again during underwriting. Lenders will wonder about unusual deposits or withdrawals and you’ll need to make sure to provide them with the proper documentation of a paper trail. 

Do not change jobs 

Sometimes we can’t control what happens to us in our career, but if possible, stay consistent in your job and your salary. Banks will take note of this, and look for stability during mortgage approval. 

Summary 

The feeling of purchasing your first home is truly fulfilling. After waiting, and hoping, your seller has accepted your offer, your loan has been approved, and the home is yours. It’s a process, and it’s a long one, just be sure to be ready for it!

 

 

For individuals and families trying to figure out how to pay off debts, American Consumer Credit Counseling (ACCC) provides non-profit credit counseling, credit card reduction and consumer debt management services for consumers nationwide. Our certified credit counselors provide financial education for anyone wanting to learn how to get out of debt and how to eliminate credit card debt. As alternative to expensive debt restructuring services and credit card debt consolidation loans, our debt management plans are a kind of credit card relief program that have helped thousands of people pay down credit card debt by consolidating payments and reducing interest rates and finances charges. We also offer bankruptcy counseling, housing counseling and other financial education services for help getting out of debt.

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