Are You Financially Fit To Buy A Home?
Purchasing a home can be a fun and exciting process. However, being financially fit can either make or break the transaction, and you need to know the best ways to get in shape. The following tips will help exercise your financial readiness.
Know Your Credit History
Your credit history is crucial to being able to obtain a mortgage on the home of your dreams. For individuals who have paid their bills late and have a substantial amount of credit card debt, you’ll probably have a difficult time qualifying with a lender. Mortgage institutions want to see that the applicants can afford the payments on the loan, and they are secure in their finances. You can check your credit score periodically to ensure that there aren’t any blemishes marring your rating. If there are any issues, you need to settle these before you try to obtain a loan.
Research Online Websites
There are a number of Internet research options that are equipped to get you ready for the home buying process, such as SmartAsset, and they can help gauge where you stand financially. Your income, debt, assets and savings can all play a key role in the process and determine where you stand. These websites can also help you understand how much you are pre-approved for a loan. Getting pre-approved is not the actual commitment, but it’s a way to understand how much home you can afford in today’s market. This also allows you to avoid looking beyond your financial means on properties for which you won’t qualify.
Have Steady Employment
Hopping from job to job can raise a red flag for a lender. Someone who has secure employment and has held that position for years will appear more favorable. Changing positions within the company can also be beneficial, especially when a promotion is involved. Self-employed and sales positions that are dependent on commission as a source of income can be another concern for many banks, and they will need to see a paper trail to prove the client’s readiness.
Save A Down Payment
In order to be able purchase a home, it’s important to have funds ready for the down payment, closing costs and any additional expenses that may occur at the last minute. Houses can be expensive, and the maintenance and upkeep are just as costly, so you need to know an estimate of the various costs ahead of time. This will allow you to budget accordingly for maintenance, general upkeep, real estate taxes and homeowner’s insurance.
Curb Your Spending Habits
Wasting money on unnecessary items can bring you closer to debt, especially if you place them on your charge card. You can save a significant amount of money just by forgoing that costly cup of coffee, eating-in instead of going out and kicking your cigarette habit. Place the money that you would have spent on these luxury items in a bank account and watch your savings climb.
The home buying process is not for those who are out of shape with their debt. Mortgage institutions have tightened their lending requirements and only the individuals with a solid credit score and financial history will be heading the pack at the end of the home buying race.
Nadine Swayne presents this information to those beginning the home buying process. SmartAsset can offer you an interactive guide to help get you “in shape” to make major purchases and understand complex financial questions.
Photo credit: http://www.flickr.com/photos/59937401@N07/5857387835/
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