How to Get Yourself Financially Prepared to Start Looking For Homes
Saturday, January 23, 2021, 6:00 PM | Leave Comment
Purchasing a home might be a goal that you have had for years.
A person that is looking to buy a home in the next few years needs to get themselves financially ready.
The mortgage lending process is stricter than in the past with more paperwork to take care of.
People that are self-employed will have to show proof of income and might even need to request forms from their clients.
Lenders do not want mortgages to default as they have to deal with selling the property and the long repossession process.
As a potential homebuyer, you need to work on a few different areas of your financial health.
Creating a list of what you need to do can help keep you on track in a variety of ways.
The following are tips on how to prepare financially when looking to purchase a home in the near future.
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Improve Your Credit Score
Your credit score is going to directly impact your ability to get a mortgage. The best thing that you can do is pay outstanding debts that are sent to collection immediately. Once you have handled this, you need to start paying everything on time in terms of your credit card. People can get a credit card they use for years and pay off monthly for things like gas/groceries.
Building a credit score takes time so it is important to start immediately. You want to get the best interest rates possible over the lifetime of your mortgage which usually requires over a 700 credit score. This has changed over the years though as Rock Mortgage, one of the top mortgage lenders in Houston notes,”Credit bureaus have been around for well over 100 years, but credit scores have only been around since 1989. I got into the consumer finance industry in 1987, back then all we knew was how many accounts you had, what your total debt was, and how you paid your bills (on time or slow). It would also tell us if you had collection accounts, charge-offs, repossessions, or foreclosures.”
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Get a Side Gig
Full-time employed couples that also have side gigs can save up for a down payment quickly. You do not want to have to pay mortgage insurance so putting down 20 percent is important. VA loans differ when it comes to the percentage of the down payments needed to surpass this insurance. Save money monthly from a side gig over the course of a few years.
You would be surprised what picking up a weekend gig can do for your overall income. The beauty of this age of technology is you can sit at home earning which provides ultimate convenience. People with specific skills like copywriting or web design can earn healthy amounts if they put in the work. Remote work is available part-time or full-time around the world. The number of remote opportunities has erupted with the COVID-19 pandemic. Finding a great part-time gig can allow you to add to your income and save that extra capital that you need.
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Really Start Saving By Creating a Strict Budget
The creation of a strict budget is important as you want to have money to live after your down payment. Buying a house is great but if you do not have money to purchase furniture, this could be an issue. The last thing you want is to take on a massive amount of credit card debt or finance the furniture. You want to have a nest egg in case something goes wrong like a loss of job in the first few years of living in the home. Lowering your fixed costs is the best thing that can be done. Canceling cable is a popular option as streaming services are usually more affordable.
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Start Consulting With a Lender
You are going to want to be in contact with a lender when you are ready to purchase a home. The lender is going to give you a realistic loan amount so you can begin your search. Avoid using the largest amount you can qualify for as this is likely going to put a financial strain on you. If you recently had a huge promotion and your income will be far higher, then this will not be as large of a risk. You are going to have to provide the lender with your tax returns and other financial information. Homebuyers should not take out loans during the homebuying process as this can impact how much they qualify for. Most lenders will also let their clients know to avoid large purchases that could impact the loan.
Searching for a home can be an exciting process when you have your finances in order. Take the time to focus on your financial health until you seriously begin looking for homes, you won’t regret it!
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