It's Never Too Early To Prepare for Buying a Home

It is never too soon to prepare to buy a home. There are things that you can do even a year before purchasing a property that will be helpful. While the home-buying process is an extremely emotional one, it is important to remember the financial side of things. Here are just a few pointers to prepare yourself for that all-important home purchase:

1. Improve Your Credit Score
Your credit scores impact many things, including your ability to get a loan, the amount of the loan that you can receive, the size of the down payment, and the interest rate that you will pay. There are plenty of places where you can find your credit scores online. Keep in mind that there are three different credit scores; Equifax, Experian, and TransUnion. Review any negative marks on your credit scores to make ensure that no mistakes have been made. Be sure to pay all bills on time and your scores will improve.

2. Pay Down Existing Debt
Banks only want a certain percentage of your income to be debt, so the less debt that you have, the bigger the loan that you can receive. I am not talking about those old college loans, which have comparatively low interest. I am talking about those high-interest debts like credit card debt. Large credit card debts indicate that someone is living about their means. Not only do these debts cost you a lot more money in the end due to their insanely high rates, but they might also hurt your ability to get a loan in the future.

3. Start Saving Money
The amount of money that you have saved up can affect the size of the loan that you receive and the amount of your monthly mortgage payments. You will need money for the down payment on your new home. At least 20% of the cost of the home is ideal, but loans can be had with a 10% down payment for a conventional loan. This means that if you plan on buying a house in the $300,000 range, then you must have at least $30,000 put away. You will also need money to pay off the closing costs, which usually range from a couple thousand dollars to upwards of ten grand.

4. Find Out Where Your Money Is
Many people have money spread out in different accounts, from checking and savings accounts, to 401k plans and stocks. Find out where exactly all of your money is and how much is out there. If you have a job that offers a 401k or 403b plan and have money automatically taken out of your paycheck, you might not really know how much you have saved. Remember that some of these accounts can be used for the down payment on a house, but you should not mortgage your entire future just to get a mortgage loan.

Buying a home is a complicated process. Banks are much more careful and thorough these days, so you need to be equally careful and thorough. A little planning and preparation today can pay big dividends in the future when you get out there and search for your new home. As always, if you have any real estate related questions, feel free to contact me at 617-852-0040 or ryan.guilmartin@gmail.com.