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Purchasing a home isn't like grabbing a great pair of jeans when you happen to catch them on sale. It's a major decision that will affect your lifestyle for years to come. In fact, just making preparations to buy a home begins long before you are ready to make the purchase. Not only do you need a reliable financial background to be approved for a loan, you must also be ready for the additional costs associated with the purchase.
It's important not to wait until you are ready to move into your dream home to learn about the home buying process. The months (and possibly years) that lead to you signing that dotted line should reflect responsible saving and spending habits. Some saving and spending habits are simply formed through sensible decisions. Others are specifically tailored to the process of buying a home.
5 Tips that Will Help You Prepare to Buy a Home
Home ownership is a big dream for your future. Getting your finances in shape is an important step in making this dream come true. These tips will help you understand how to prepare for your first home purchase.
Learn Your Credit Score
Your credit score has a major impact on many factors about your potential home purchase. It is the first thing any mortgage lender will consider. Your credit score is a three digit number that shows lenders your ability to repay a loan. A good credit score can help ensure you actually get the loan you apply for. It can also get you a better interest rate. If you find your credit score isn't as high as you'd hoped, it's time to look into ways to repair it.
Gain an Understanding of What You Can Really Afford
Your mortgage payment will be a long term part of your regular life. A payment you can afford financially may not be a payment you can actually live with. The pre approval process for a loan depends mostly on your income and how long you have been at your current job. Your saving and spending habits will help you determine the type of payment you can really live with.
Save Your Money
To buy a home, you will need to be prepared with a down payment. For the best mortgage rates, you will be expected to pay 20% of the total cost of the home. For a $300,000 home, the payment will be more than $50,000. If that number takes your breath away, try not to overreact. Many buyers don't make a full 20% down payment. Take the time to learn about options that will help you make your down payment more manageable.
Talk to a Loan Officer
A professional loan officer can help you learn about the many factors involved in a home purchase. Even if you aren't ready to purchase right away, a loan officer can help you understand all of the costs involved in buying a home. This initial meeting is also a good time to ask questions about down payment assistance, finance options, and lending programs.
Avoid Last Minute Changes
After repairing or building a respectable credit score, you need to keep it that way. As your home purchase nears, it's important not to make decisions that could change your position. Switching jobs, getting a new credit card, or even making a furniture purchase can temporarily change your credit eligibility. When you are ready to make this important purchase, keeping things exactly the same can mean a better position to negotiate the mortgage deal you need for your future.
At First Mortgage Savings, our loan officers specialize in residential lending making them experts in every part of the home buying process. To learn more about how to prepare for homeownership, contact us today.