Buying a house is much more than taking out a mortgage and making sure that your monthly payments are in order! You need to make some financial changes in your life, which might mean living a simpler life, just for a while until you can save enough. You won’t be able to start saving money until you are prepared mentally.
It’s all about the finances, and that is what we are here to talk about. Whether you are planning to buy a house tomorrow or in the near future, you need to create a game plan and list down all the steps that you “will” follow to bring that savings account back up. Though taking out a mortgage is not that hard, the problem arises when you fail to keep up with monthly payments.
Following four steps will help you improve your finances, and finally allow you to buy your dream house:
Get Your Priorities in Order
It’s time to make some cuts in your life. Anything unnecessary that is more of a luxury than a necessity can take a lot out of your budget. The budget you set does not just include the house. It includes the expenses you will incur after buying the house such as electricity bill, grocery, maintenance, utilities, property taxes, homeowners insurance and repairs. This is nothing to be alarmed of because these are basic expenses, which you will have to pay for from you savings account. If your personal account does not cover these expenses, you can apply for a mortgage.
Repairing Credit Score
The higher your credit score, the better terms you will get on your mortgage. Banks and private lenders always ask for a credit score before giving out a mortgage. Late payments and previously standing loans are usually the cause of a declining credit score. You can bring your credit score back up to the lender’s requirement in no time by fixing it, starting from six months back. Here’s how to do it:
- Use only 35% of the credit line
- Make monthly payments instead of yearly
- Don’t go for a new credit line if the old one has maxed
- Keep making payments until the credit score is 720
Credit Builder Card (Optional)
Some people might say that a credit builder card is a scam but if you have a steady job and your priorities are straight, you can easily reach the required credit score range. These cards issued by the bank allow you to increase the credit rating much faster when you make the payments. The only drawback of this card is that it operates on a high interest rate.
Save Money for the Down Payment
Putting down the down payment can be very hard, especially when you don’t have a good credit score. In order to save money for the down payment, you need to do the following:
- Stop overspending (the higher the down payment, the lower the interest rates on the house will be)
- Don’t make payments from your credit card
- Think about selling your car any other asset for the down payment and other fees (invest in savings vehicle)
Apply for an FHA Loan Program
The standards of an FHA loan have been specifically set for first time home buyers. These loans are easy to get if you have a steady income and meet the requirements set by the FHA-approved lenders. The credit score required for this is 580, where borrowers can get a down payment as low as 3.5%.
As first time home buyer, you may find the process a bit overwhelming. As mentioned earlier, as long as you have a steady income and make monthly payments on time, you can make your “American Dream” of being a homeowner come true. You can learn more about home buying and the purchase process to the closing at https://www.kstrealty.com/.
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