And before you buy a home it’s important that you get your financial house in order. By planning ahead you’ll be able to get the best deal on a mortgage and you’ll improve your financial situation along the way.
Here’s how you can prepare to buy a new home.
Get Your Credit Straightened Out
The interest rate you pay on your mortgage is the biggest factor in determining your monthly payment (other than the loan amount.) The lower your interest rate the lower your mortgage payment will be.
In order to get a decent interest rate you’ll need to have a good credit score.
Get a free copy of your credit report and also check your credit score to know where you stand. If your credit is in bad condition you’ll need to bring it up before applying for a mortgage.
Pay Down Debt
If you’ll be new to home ownership it’s important that you are in a good spot financially. In the past few years many first time home buyers have faced foreclosure and even bankruptcy due to taking on a mortgage they couldn’t afford.
By paying down your debt you’ll be far more appealing to banks and have a better chance of becoming a successful homeowner.
Save At Least 20% Down
Once you’ve figured out how much of a mortgage you can take on you’ll need to start saving for a down payment.
While some banks will let you put less than 20 percent down you’ll be required to pay private mortgage insurance if you do so. This is an added expense you should avoid at all costs.
Map out a plan to save as much money as possible. Cut your expenses and save every penny you can. You should be saving at least the amount you project your future mortgage payment to be.
Shop for Loans
There’s no one size fits all loan. Different banks will offer you different interest rates and terms so it’s important you shop around.
For example, some banks won’t offer mortgages for contractors due to the unsteady pay most contractors bring in. Some banks will require you to have an extremely high credit score to qualify for a mortgage, while other banks are more lenient.
Research financial institutions before applying for a loan. Once you’ve narrowed your choices down to just a couple see what kind of interest rates those banks can offer you.
Becoming a homeowner is a huge step and it’s important that you take the time to prepare for it. You shouldn’t just jump into a mortgage. Get your financial house in order and make sure that you will be able to comfortably afford your new payments.
What advice do you have for preparing to take on a mortgage?