What is the best way to prepare for a home purchase? You could make a “wish list” of the features you want in a house. You can also browse available listings online. While these are important (and fun!), t.’s one task that precedes them: getting your finances in order.
Bracing yourself for the mortgage application process is critical. After all, if you don’t get a mortgage, your house-hunting wish list is pretty useless, isn’t it? It takes a little time to get acquainted with your financial situation, but it’s time well spent. Here are four things you can do to ensure that you’re ready to apply for a mortgage:
- Set a budget.
To know how much money you can spend on a mortgage payment, you’ll need to know how much you need to spend on other things. Grab your bank statements, receipts and anything else you need to help you analyze your past three months of spending habits. Some financial experts recommend keeping your necessary monthly expenditures (including housing) under 50% of your take-home pay.
- Set a savings goal.
T. are countless mortgage programs available that require little money upfront, however, if you can save at least 20% for your down payment, you can avoid PMI and be eligible for a lower interest rate. This isn’t possible for everyone, and t. are also closing costs to consider. Talk to a mortgage professional to learn about your options.
- Remember to budget for ALL housing-related costs.
When you purchase a home, you’ll write a lot of checks! Property inspections, moving expenses and a fresh coat of paint to make it your own all add up! Don’t forget to earmark some savings for these incidentals.
- Review your credit.
Before applying for a mortgage, make sure your credit is top-notch. Get a free credit report and scan it to see if anything seems awry. If you notice an error, get it fixed pronto so you can get the lowest interest rate possible.
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