5 tips to get your finances ready to buy your first house
1. Review your credit report.
When you start thinking of buying a house, a great first step is to pull your credit report to see what your credit score is. Ideally your score should be in the 700 range or higher, but you can still get a mortgage with a lower score. In addition to looking at your credit score, you want to look at the report for inaccuracies. It can be difficult and time consuming to fix any mistakes that may appear on your credit report so the sooner you work on them the better.
2. Find a great loan officer.
Your loan officer is going to make sure you get a mortgage that best fits your unique circumstances. You want to find someone competent and knowledgeable. He or she can give you a pre-qualification letter that you will include if you decide to make an offer on a house. It’s best to find the loan officer you want to use before you find a house so that you are already set up and they can get you a pre-qualification letter quickly.
3. Save, Save, Save!
Saving plenty of cash is so important! You will need money for closing costs, a down payment, moving costs, and any changes you want to make once you move in. You would be surprised at how quickly those things can add up! Closing costs usually average around 3% of the purchase price. A down payment can be anywhere from 0% to 20% of the purchase price, depending on what type of loan you are getting.
4. Pay down debts.
If you have debt, pay off as much as you can before buying a house. The less debt you have, the easier life will be when you move into your house because you will have less money going out to bills. Not only that, but you also may qualify for a larger mortgage since you will be lowering your debt to income ratio.
5. No large purchases once you are under contract.
Once you are under contract, don’t go out and buy furniture or a car on credit! It could affect your ability to get the mortgage. Wait until after closing to buy those things.