When you are ready to begin looking for your first house, you'll want to take some time to get your finances in order. Your real estate agent can help you to determine how much house you can afford, but getting a mortgage means more than just picking a home within your affordable price range. Here are a few things you should do in the months before you purchase a home.
Check Your Credit Report
Your mortgage lender will check your credit report, so it's a good idea to do it first. This gives you a chance to correct any false information on the report, and it gives you some time to repair less-than-perfect credit. Check to make sure all of the accounts listed are actually yours, and dispute any false information. If you have any accounts that are in collections, you may want to take this time to pay off those outstanding debts.
Avoid Large Purchases
When you apply for a mortgage, the lender will look at your current financial situation. This includes any outstanding loans you might have. Even if your loans are current and in good standing, having too much debt might be a warning sign that you can't take on another loan. You may want to hold off on purchasing a new car, particularly if you've just paid off your existing auto loan. You can meet with a financial advisor who can help you to determine the state of your finances before applying for a first-time home loan.
Set Aside Money To Buy Points
In some cases, you may find that you are approved for a mortgage, but the interest rate is higher than you might like. Depending on your situation, you may be able to buy interest points on your loan. This means paying a specific amount of money in advance to reduce the interest rate for your mortgage. Typically, the rate is set at 1 percent of the total cost of the mortgage. Buying points is a good option for people with less-than-perfect credit, as it helps to make your new home more affordable. As you begin to set aside money to cover your down payment and closing costs, consider budgeting for points just in case you need to purchase them.
Gather Financial Documents
When you apply for a mortgage, you'll need to provide documentation showing your current finances. This includes pay stubs, bank statements, tax returns, and statements for your current loans or credit cards. Create a binder and begin sorting and filing all of this information away. Update it every week or month until you are ready to apply for financing for your home, as this will help make it easier to provide all the necessary documents when you need them.
Your real estate agent can help guide you through the early stages of the home-buying process, such as getting pre-qualified for a mortgage and helping you to determine what the actual cost of a new home will be after taxes, mortgage insurance, HOA fees, and other associated costs.
When it comes to keeping your business afloat, there aren't many things more important than looking after your finances. If you aren't careful, financial problems can get out of hand quickly, which can affect your ability to stay in business at all. I run a small business out of my home, and I can tell you that careful attention to your books can make a world of difference. Check out this website for more information about financial considerations, spending, and monitoring your bottom line. I'm not a professional accountant or anything, but by making a few moves in the right direction, you can solidify your business and avoid financial disaster.