5 Financial Steps to Take Before Buying Your First Home
Are you thinking about buying your first home? That’s a great decision to make but also one to take your time making. Why?
The biggest thing about buying a home is the financial commitment you’ll be making. Before you commit to a home, it’s wise to consider some financial steps beforehand:
Consider the right loan for you
As you set out to choose a home, an important step in the whole process is to choose the right mortgage loan for your situation. There are a variety of loans available for various kinds of people. Thus, you’ll want to make sure to get the best option for your situation and location, whether it’s a VA loans Colorado or an FHA mortgage loan in Utah.
The loan that suits your current lifestyle or needs could help you save money, so make sure to shop around before making any decision. After all, becoming a new homeowner is a huge financial decision.
Get your credit score up
Before you actually set out to apply for a loan, an important thing to do is to make sure you have good credit. A high credit score is a surefire way to get approved for the loan of your choosing, whereas a low credit score could make it difficult for you to get approved at all.
If you find that your credit isn’t where you want it to be, you could always start working on it today. Pay off bills when they’re due and do your best to avoid debt. Check your credit on a regular basis in order to monitor your score and track improvement.
Save your money
Down payments are typically pretty high, and you’ll want to try your best to have more than the percentage required, as this can help you save big-time on fees and rates. After all, unnecessary fees and rates can make paying off the mortgage a real headache and pricier than you had planned for.
With a larger down payment, you can get the type of loan you had planned for and also get a shorter-term repayment period in most cases. If you’re not sure what the average down payment is in the area where you’re shopping, do some research! For example, if you plan on buying a home in Nevada, look up the Nevada average home price and set your expectation based on that figure.
Keep track of your income/expenses
Keeping track of your income is important, especially if you’re self-employed and will need to show proof that you have a steady income when it’s time to apply for a loan. Keeping track in some way, whether through pay stubs or income statements, can help you to present the right documentation when you want to buy your first home.
Tracking your expenses before it’s time to buy your home can help you save the money needed for the down payment. There are expense tracking apps you can use that can make it easy, so that you are able to budget the money you want to save for your future home.
Invest in a home you can afford
Too often, people try to buy homes that are pricier than what they can actually afford, because many forget that buying a home comes with fees, closing costs, interest rates, etc. Investing in a home within your budget allows you to pay off your loan comfortably, and is a wise financial decision you should consider as you work on saving for the down payment.
Don’t commit to a home that is above your means, as you could end up house-poor, as they say, and miserable.
Buying a home is certainly a great feeling. Getting the keys and opening the front door once it’s yours feels amazing. A whole new phase of your life awaits. However, you don’t want to commit to buying a new home until you’re ready.
If you find that your credit score is lower than you’d like and you haven’t saved up enough for a large down payment, consider waiting until all your financial ducks are lined up. You’ll be happy you did.