Buying a home isn’t a flippant decision. There are several things you’ll need to do to prepare your finances for the purchase, and you’ll have to start your efforts long before you hope to cross the threshold of your new home.
If you’re hoping to purchase a home soon, it will benefit you to research the precursors for purchase. Take a moment to read through this brief look at some financial preparations you’ll need to achieve before you start the process of purchasing a new home.
Decide what you can truly afford
First, you should do the math to figure out what you can truly afford to pay for a home. Gather a reliable total for your gross monthly income. Take 45 percent of your gross monthly income and subtract any monthly debt payments you are responsible for paying.
The number that is left over is what you can generally afford to pay for a mortgage payment each month. You may want to hire a mortgage investment professional to help guide you through the financial aspects of homebuying.
Decide what you truly need in a home
Take the time to decide what you really need in a home. If you’re just a single individual purchasing your first home, you probably don’t need a three-bedroom place.
Weigh the scales of what you need and what you can afford to find a happy, affordable medium. There are numerous aspects to consider when deciding what you need in a house, so take your time to be thorough.
Start building your credit scores
You’ll need a decent credit score to get into a comfortable home. If your score is lower than 650, you’ll have to push a little harder to actually get a good deal on a house. Try pushing your average higher than 650 before you start the process of mortgage approval.
Start saving money for a down payment
You won’t find a great home with less than $20,000 saved for a down payment. Depending on what you’re looking to purchase, you may likely need much more than $20,000 for a down payment.
The point is that it will take some time to accrue such a large sum of money. If you want to be in a house by the time you’re 30, for example, you should start saving for your down payment by the time you’re 25.
Get a preapproval letter from the lender
Before you can ever make a true offer on a property, you’ll need to have a preapproval letter from a lender. You need proof that you’re good for the money before a seller will seriously consider your offer.