If buying a home is on your agenda this year, it’s time to start planning now! A home purchase is one of the largest financial transactions you’ll make, so it’s important to ensure you’re properly prepared for this big step in your life. If you plan to finance your home, your lender will be required to carefully review your finances before approving you for a mortgage. Getting your financial situation in order before this step is the key to success! In honor of Financial Wellness Month, we’re sharing five tips to help you prepare for the home financing process.
1- Get Your Credit in Check
A large factor determining where you stand financially is your credit score. Building a strong credit background is essential when it comes to taking out a mortgage. The higher your score, the more loan options may be available to you. Improving your credit takes time; the earlier you begin working on it, the better. Good credit is important for many things, so it never hurts to focus on building credit even if you’re not quite ready to become a homeowner.
2- Start Saving
Many loan programs include some upfront costs for the homebuyer, whether it’s a down payment, closing costs or other fees. Coming up with a large sum of money all at once can seem daunting, but if you’re able to save a little bit of money each month, you may be surprised at how much you’ve stashed away after a period of time has passed.
3- Research Mortgage Programs
It’s a good idea to understand the types of mortgage program options available to you before you become too invested in the home search process. You can start with a simple Internet search, but it’s best to go ahead and find a lender who can walk you through the ins and outs of the mortgage process. A lender will be able to provide you with estimates of how much cash you’ll need on hand for different loan programs and the monthly mortgage payment you can expect to pay based on home prices. Certain government loan programs require as low as a 0% down payment.
4- Get Pre-Qualified
As you begin working with a lender, you’ll want to go ahead and start the pre-qualification process before you land on the perfect home. Low interest rates over the past year have led to an increasing number of buyers, which has, in turn, made the real estate market more competitive. If you find a home that you love, it’s important to show the seller that you’re serious by getting pre-qualified to purchase their home.
5- Understand the Costs of Buying a Home
Once you’ve selected a mortgage program and gotten pre-qualified through your lender, you will get a clearer picture of how much cash you will need to complete the home purchase. Your lender will provide you with a loan estimate that will break down your overall costs, including your monthly mortgage payment and any closing costs and fees that you will be responsible for paying at closing. This is also a good time to make sure you are comfortable with the budget you’ve set for your home purchase, as you will be able to see how that overall price breaks down into a monthly payment.
When you’re ready to begin your journey to homeownership, C&F Mortgage will be there for you every step of the way. Our local industry experts are always focused on you and your mortgage needs – get in touch with us today to get started!
Thank you for explaining how saving some money each month can help you afford any down payments that a loan program may include. My wife and I have been interested in buying a fixer-upper house since we’re planning on having our first child this summer, but we’re worried that we may not be able to afford a house since my wife has been unable to work ever since she got pregnant. Maybe we should save some money and find a loan program that is within our price range.