Preparing Your Finances to Purchase a Home

Prior to hitting the market and checking out listings, you need to take care of some necessary tasks, including saving up plenty of money for a new home, enhancing your credit score, and getting pre-approved for a home loan.

BUILD UP YOUR SAVINGS

Though America’s financial crisis is now in the rearview mirror, lenders nationwide continue to have stringent lending standards, meaning it takes significant amounts of capital for prospective borrowers to secure home loans. Focus on building wealth before even considering your home purchase to ensure you have more than enough to convince lenders you’re ready to become a homeowner and handle the subsequent mortgage payments with ease.

IMPROVE YOUR CREDIT SCORE

Another factor lenders strongly take into consideration is the strength of potential borrowers’ credit scores. The math here is simple: The higher your score, the better you look in the eyes of lenders. Doing things like paying all of your bills on time and in full, eliminating outstanding debts, and avoiding taking on new lines of credit can bolster your credit score and enhance your odds of securing not only a home loan, but also favorable loan terms.

GET MORTGAGE PRE-APPROVAL

After getting all of your finances in order, it’s time to head to lenders to get pre-approved for a home loan. Whereas pre-qualification is an estimate of how much house you can afford, pre-approval is getting lenders to deem you worthy of receiving a mortgage. Once you’ve been pre-approved, you can search online to find the most favorable mortgage rates and terms from various lenders and, ultimately, choose the one that’s best for you and your finances in the long term.

BEGIN THE HOME SEARCH

You’ve completed all of the dirty work, and now, it’s your turn to actually begin the home search in earnest by checking out what listings are available in the area in which you intend to purchase a home. Having said that, it’s in your best interest to find a buyer’s agent who knows the local real estate market well and has a proven track record of getting their clients in the right home that fits their budget and preferences.For more information and help on preparing your finances to purchase your home, feel free to contact me.Data: The National Association of Realtors 2014 Profile of Home Buyers and Sellers