Buying a home can seem like a daunting commitment, but can be a smart investment and a big life step. If you feel you’re ready to take the plunge, it’s important to first be sure you’re ready financially. Knowing what you can afford before you begin looking will help you make a wise decision when it comes to the price of the house you purchase. Setting a budget is a key step to take before you even begin the house hunt. Here’s some steps to take when getting started.
Build good credit
A higher credit score helps potential home buyers to qualify for a better, more affordable mortgage rate. Banks will be more hesitant to give loans to buyers with low credit scores as it’s often seen as an indication of poor financial decisions or consistently late payments.
If you don’t know your credit score, check if your credit card provider has included it on your statements. Otherwise, there are many credit score services available for a low cost. If your credit score is low, there are ways to raise it before asking for a loan. Begin raising your score by…
- Paying all bills on time
- Reducing credit card balances to less than 30% of the limit on each account
- Paying off past-due bills
- Staying with the same credit card company rather than switching frequently
- Establishing three lines of credit (these could be school loans, car loans or credit cards)
Raising your credit score can take a while, but it will be worth the wait since you will be more able to afford the home of your dreams!
Begin saving consistently
It’s likely that you already having a savings account if you’re considering buying a house. But if you aren’t setting aside a set amount each month, it’s a good idea to begin doing so. This will help you get in the habit of paying a mortgage. Lenders also appreciate seeing a steady pattern of saving— a good indication you make payments consistently.
Run the numbers
Understanding what you can afford by talking to a lender months before you are ready to begin the house hunt is a great idea. Understanding the loans your credit score will qualify you for and how much house you can afford from your savings will help you to be more realistic in your hunt. Use tools like our website’s loan and mortgage calculator to help you keep your expectations realistic before meeting with the bank.
If you’ve already checked the above steps off your list and are ready to begin the house hunt, get in touch with us! One of our agents would love to help you find the perfect home.