The idea of being a homeowner is exciting and maybe a little scary. It is normal to be apprehensive before taking such a big financial step. Preparation is the key to managing anxiety and ensuring your finances are where they should be.
Looking for the perfect home should be fun. When viewing residential properties, you want to spend your time selecting the home that is the perfect fit for your family. Having your finances in order allows you to do so.
What’s Your Credit Score?
To get the best rate on your mortgage, you want a strong credit score. While you can qualify with a lower score, particularly if you have a solid employment history, you will save thousands over the life of your loan with a lower interest rate.
If your credit is not where you would like it, there are some things you can do to boost your score. If you have any open collections, paying them off will help you qualify for a mortgage. Even though the collection will remain on your credit report, it will be marked as paid. Mortgage lenders are often unwilling to provide loans to anyone with open collections.
How’s Your Debt?
You want to have a low debt-to-income ratio before purchasing a home. If you have too much debt it will be difficult to qualify for a mortgage. Even if you do qualify, debt repayment can put a strain on your budget.
Are Your Savings Solid?
People often think in terms of saving for a downpayment, but that isn’t the only savings you need before purchasing a home. When you are a renter, the landlord is responsible for repairs and maintenance. Once you are a homeowner, the responsibility, and expense, fall on you. You should have a healthy emergency fund, the equivalent to at least three months of expenses, and ideally six months, in addition to money for your down payment and closing costs.
Is Your Employment Secure?
If your employment situation is not steady, you may want to put off buying a home. Although it is impossible to tell what the future holds, starting with a job that meets your financial needs is important before purchasing a home. If your employment is seasonal, your hours vary wildly, or there are other issues, you may want to wait until you have more security before moving forward.
Buying a home should be an exciting time. The best way to enjoy the process is to make sure your finances are in good shape for not only the long-term but to handle the many unexpected expenses that crop up during the homebuying process.
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