The old saying is that a home may be the most expensive purchase most people ever make. When you consider how expensive homes can be, you may realize that this statement is true for you as well. When it comes to dealing with the financial aspects of finding financing, even a relatively small error can turn into a major blunder. If you've decided that it's time to purchase, your best bet is to focus on the dollars and cents of the issue before you begin looking at homes for sale. Read on to learn more about getting your wallet ready to buy a home.
What's the Score?
These three numbers can mean the difference between thousands of dollars when you consider interest rates. A tiny variation of a percentage point can equate to quite a bit of money you end up paying over time on a 15 or 30-year mortgage. Any actions you take to improve your credit score will have an effect on almost every aspect of your financing. For example, your debt-to-income ratio is a big consideration for lenders, so paying down loans and credit cards before you apply for a mortgage will not only raise your score but make this ratio look more favorable.
Improving your score may not be a quick or easy process, but taking the following actions will pay off handsomely:
1. Pay your bills on time every single month. Every day late lowers your score.
2. Keep the balance on your cards low. Using too much of your available credit shows poor financial control.
3. On the other side of the coin, don't have too much available credit at the ready. This is perceived as being too tempting not to utilize for most consumers. Keeping just the right amount of debt, of the right kind and within the right period of time can be tricky.
4. Don't apply for more credit before you apply for your home loan. Hold off on that car purchase until after the closing to avoid affecting your score. Even credit inquiries will bring your score down, so put a priority on getting your mortgage first and foremost.
Do you know how much home you can afford?
You may be thrilled to be approved for a home mortgage that is much higher than you predicted, but don't go changing your search terms on those real estate websites just yet. Just because the lender has approved you for a $500,000 loan doesn't mean that you have to get a home that expensive. Take a hard look at how the loan payment, homeowners' insurance premiums, property taxes and other costs will affect your budget and decide for yourself how much you are comfortable spending.
Speak to your real estate agency, like Coast Real Estate Professionals, for guidance on getting your dream home.