What to Work on Before Purchasing a Home
What to Work on Before Purchasing a Home?
By: Tanya Torres
The American dream has always involved owning a house with a white picket fence. You could even hear it being recited after hearing it countless times over the years, but you never hear anyone say their dream home is a rented home. Financial circumstances can get in the way of buying your dream home and you might be left wondering whether you should even buy a home when you finally are able to purchase one. We have created a list that can guide you when you are finally ready to purchase your dream home.
The first thing you have to consider when you are thinking about purchasing a home is whether you can afford it or not. This is an important decision in your life, one that costs as much as those school loans and other consumer debt you piled up over the years. If you have quite a bit of debt then you will have to keep in mind that lenders will look at everything that you owe before deciding to work with you. If you’re not at a point where they believe that you can purchase a home due to your debt and monthly gross income then they will not work with you. This will immediately tell you if purchasing a home is in the books for you or not.
Before you jump on the ol’ American dream of owning a home, you better check to see how much money you have in your emergency funds. This is important because you will need to have enough emergency savings in your account to cover three to six months of expenses when considering purchasing a home. This is an important factor in your decision of purchasing your home since you never know what unexpected expenses can pop up after your big decision. By having an emergency fund stored away for a rainy day, you will be prepared for an obstacle that comes your way.
Having a downpayment of between 10 and 20% ready for your home purchase is always a plus. The reason why having a downpayment is important in purchasing a home is that it shows the lender that you are financially ready to purchase a home. Although there are ways to avoid giving a downpayment, it is highly recommended to give one since it can protect you in case the housing market drops or if you might need to move. If either of these scenarios happen then the downpayment will help you move since it prevents you from owing too much on the house. You have three options; lose money, ruin your credit or do both if you are in this situation. If you are forced into this situation then having a downpayment will help you tremendously if this ever occurs. The downpayment also helps you in increasing the size of the home you can afford and allow you to look at home in better locations.
It seems that credit score will always be important for everything that you do, especially buying a home. Well, everything and everyone except for Dave Ramsey who prefers living a life without credit and using cash for everything. Unfortunately for the rest of the world, we need to use credit to get what we want, which is why credit scores are crucial in purchasing a home. The higher score you have, the more likely you will be approved for a lower interest rate for your mortgage. Although this is something you definitely did not think about when you were younger, it will become important to you especially if you’re saving money in the long run with mortgages. Boost your score as soon as you can and do not touch those credit cards or you will have to wait to purchase a home later. Any type of activity will ruin your shot of that dream of yours.