There is no arguing that buying a home is one of life’s biggest decisions. Coming up with your wishlist in terms of number of bedrooms, neighborhood and preferred school district is the easy part – but marking through a preparatory financial checklist can be a bit more daunting. Remember, take one step at a time – you will get there.
Before you visit your mortgage professional, request your credit report. Clear up any inconsistencies or disputes. Start this process when you start thinking about your house hunt. Sometimes cleaning up your credit report can be a process that takes some time, so there is no harm in starting this portion of your home hunt early.
As you are giving your credit a good cleaning, begin gathering other documents you will need when you visit your mortgage professional. Collecting two years worth of tax returns and W-2s as well as your two most recent pay stubs is a good place to start.
Next, working with your mortgage lender, find out what you can afford. The common rule-of-thumb is to keep your mortgage payment under about 31 percent of your gross monthly income. However, you will want to want to check with your mortgage professional to make sure that you are considering all costs of home ownership and your overall debt load when you are crunching numbers.
Finally, build your savings over time. No matter where you are in your home buying process, this is something you can begin doing immediately, knowing savings will benefit you regardless of when you choose to purchase a home. Keep in mind that although you may qualify for loan programs offering less of a down payment than others, it can be beneficial to keep your options open. Having money in the bank leading up to your purchase, allows you to decide if you will be using your savings for a down payment, home repairs or as proof that you are a lower risk borrower.
Buying a home doesn’t have to be a stressful endeavor. A little preparation will go a long way as you are looking for the home that will provide the foundation for your future.