Putting together a financial checklist for yourself with the specific goal of buying a home in mind is slightly different than simply just creating a budget. Budgets are essential for financial health and they help to guide you and keep you on track, however there is more to consider than just money in and money out if you want to find success as a homeowner. The more time you give yourself to clean up your personal finances, the better standing you will be in when it comes time to set the wheels in motion towards homeownership.
Credit Check
Your credit score is virtually the foundation that your mortgage will rest on. Healthy credit scores put you in a better light with lenders and you are more likely to receive favorable rates and terms with clean and strong credit history than without. To find out what you need to know about credit scores you can start by examining your personal credit report. Take stock of any blemishes that exist and begin to clear up what you can, this will slowly help you to boost your overall score.
Other factors that play a role in your credit score that you can put into practice if you have not already, are paying bills on time and in full, using less of your available credit on cards, and maintaining a mix of credit accounts. Regarding credit cards specifically the monthly calendars they are set up on regarding payment and billing cycles gives you a chance to slowly work on your balances and create habits that are sustainable.
Stash Your Cash
If your timeline for buying a home is defined, then chances are your monthly budget is going to need tweaking. Saving for a down payment is going to take some extra effort and sacrifice on your part but the habits you create to hit your lump sum goal will stick with you and help you stay on track once you have the responsibility of your mortgage added into the mix.
Committing to a certain amount each month to save is standard, if you can dedicate any extra funds towards your down payment, that is extra credit. Stashing away any financial windfalls such as a bonus from work or income tax refund check into your home fund will give it a nice bump and get your closer to your total amount. The best part about stashing away this found money is that it has little to no impact on the rest of your budget since it is money you were not relying on.
Know What They Know
The ‘they’ in this tip being the lenders. Get familiar with what they are going to be looking at when they go through your finances with a fine-toothed comb. If you can get ahead of the curve that gives you a better chance to come out of your first home loan meeting on top. Some common things that lenders look at to assess your eligibility are, down payment amount, tax returns, and debt to income ratio.
