Web
Analytics
3 Tips for Financially Preparing to Buy Your First Home  | Articles | Blog | Better Marriages | Educating Couples - Building Relationships

3 Tips for Financially Preparing to Buy Your First Home 

Guest Post

Buying your first home can be one of the most exciting — and stressful — moments of your life. Knowing how much you can realistically afford, house hunting, and qualifying for a mortgage can feel overwhelming. But don’t panic! It’s not as difficult as it may seem. Check out these tips to help navigate the learning curve and prepare yourself financially to close on your dream home.

Determine How Much House You Can Afford 

The first step to take before buying a home is to make sure it’s the right time to do so. To do this, you’ll need to figure out how much house you can afford. Take a look at your monthly debt-to-income ratio, which determines how your combined gross monthly income stacks up against your recurring monthly expenses. Can you save money each month, or are you feeling financially constrained? It’s important to be honest about your budget so you get a realistic idea of what an affordable mortgage might look like for you. A good rule of thumb is to keep your mortgage between 25% and 30% of your income.

But that’s not all. Buying a home is a huge personal and financial milestone, so you should know how expensive it can be. As a homeowner, you’re responsible for all costs associated with home ownership, including those normally covered by a landlord, like repairs, utility bills, and garbage pickup. You’ll also need to account for extra expenses like the down payment, property taxes, and insurance.

Prepare Your Finances 

Once you know how much house you can afford, it’s time to decide if you’re financially qualified to buy. Before you start house hunting, check that your credit score is in good standing, that you can afford new debt and manage existing debt, and that you have an emergency fund.

Do you have the credit score to buy a home? It shouldn’t come as a surprise that your credit score will determine whether you qualify for a mortgage and affect the interest rates lenders will offer. You can obtain a copy of your credit score for free online or through your bank. If you feel like your credit score could use a boost, pay down credit card balances fast, or lock up your cards for a few months before buying a home.

Speaking of paying off debt, before tacking on a huge financial commitment to your budget, make sure your current debts are under control. Most people have debt at some point in their lives, so it’s not abnormal if you do. Whether it’s a home, a student loan, or a car payment, it’s important to have a plan to pay it off. Missed payments can cause financial stress and ruin your credit score.

Finally, because there is more involved in buying a home than simply buying the house, you’ll want to start saving early and establish an emergency fund for a financial cushion. Beyond the down payment and closing costs, you’ll also want to think about move-in expenses. The best way to start saving to buy a house — and for all the costs associated with homeownership — is to build your budget now. An easy way to start is by looking for ways to save in your day-to-day life. Consider refinancing your student loans to get a better interest rate, canceling unused subscriptions, grocery shopping with a list, and being more cautious about your online spending.

Compare Mortgage Rates 

Do your homework before committing to a loan, including getting pre-approved and researching the different types of mortgages available to you. Take the time to compare rates from multiple mortgage lenders. The worst thing you can do is take the first offer you get. Once you feel comfortable with a lender, you’ll be ready to put down an offer on your first home.

Getting ready to buy your first home is exciting, but there’s also a lot to do before you start house hunting. By making sure you’re financially prepared ahead of time, you’ll be ready to successfully start along the path toward home ownership.