Buying a house can be an overwhelming and intimidating process. First, you need to determine how much you can afford to spend, and prepare yourself for a long-term financial commitment to debt repayment. Becoming a homeowner affects a lot of different areas of your finances. Make sure you are up to speed with some much needed financial advice to get you ready to buy a home.
Advice for the Potential Homeowner
Focus on Your Credit Score
As soon as you starting thinking about becoming a homeowner, pull your credit report. Use all three credit reporting agencies as each reporting agency can have different information listed. Work with the agency to clear up any erroneous information. They can be in the form of a wrong address, social security number, etc.
Make sure you focus on making your credit score stronger. You want to have a score of 760 or higher so that you qualify for the lowest interest rates. Anything below you can still qualify, but it may not get the most favorable loan rate. If you are below a 660 you may still qualify, but you will pay more in interest. It can take 6 months to a year to clear up credit reports and start rebuilding your score. Keep this in mind as you begin thinking of your future home.
Take a Homebuyer Class
Many homebuyer classes are offered online or in person. It will save you time and energy you can’t get back. These classes can provide a thorough background of information; some programs also offer financial incentives for completing the course.
Prepare Your Budget
Once you have decided to buy and are working on improving your credit, look at cutting back on your current expenses. What can you live without? Where are you spending frivolously? Can you take that extra money and put it towards your down payment? Most of all, make sure you know where your limits are. Use the How Much House Can I Afford calculator to assess your finances.
Manage Your Debt
Pay down any outstanding debt you currently have. This includes credit cards and even loans, such as a car loan. Tackle your credit card debt as much as possible as quickly as possible. It can only help you to embrace the financial responsible you are about to have as a homeowner.
Save, save, and save some more. The more money you are able to put down towards your mortgage loan, the better and more attractive you will look to a lender. Additionally, if you can put down more than 20 percent, you will not have to pay private mortgage insurance (PMI) which is required on conventional loans.
Position Yourself to be Credit Worthy
Furthermore, your credit worthiness is key in the homebuying process. You want to position yourself as a good risk to any lender that looks at your application.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.