Owning a home is the American dream. When you rent, you are giving someone your hard earned money so they can live out their own American dream. Wouldn't it be nice to use that same amount of rent money each month to buy your own home and have your own American dream?
When you decide you are ready to own your own home, there are a few steps you need to take in order to accomplish your home ownership goal. The first thing you need to do is check your credit. You should contact credit reporting agencies and request copies of your credit report. Review the credit reports to see if there are any errors and work with the credit reporting agencies to rectify any issues. Make sure the errors are resolved before you apply for your home loan. When your credit score is high, you will receive optimal interest rates and better terms on your home loan. If you will be applying for a home loan with another individual, make sure they review their credit reports as well before applying.
Make sure you have bank accounts. You will need to make sure you have a checking and a savings account. Make sure your bank accounts are current and be diligent so you do not overdraw them. Try to set up a weekly deposit to your savings account. By keeping your bank accounts in good standing, you will show potential lenders that you are meticulous with your financial affairs.
If you have outstanding debt, you need to pay that down as much as possible before you apply for your home loan. Lenders look at your debt to income ratio an d the lower your debt liability, the more home you will be able to purchase.
Before applying for your home loan, you also want to make sure there are not a lot of inquiries to your credit for at least two months before applying for your loan. When there are inquiries on your credit report, your score is lowered and you want to make sure your credit score is as high as possible when you apply for your home loan.
When you are ready to purchase your own home, begin saving for a down payment as soon as possible. The more money you have for a down payment, the less you will have to finance on your loan and the lower your monthly payment will be. In addition to lowering your loan and payment amount, when you have a 20% down payment, your mortgage lender will not require you to have mortgage insurance. Mortgage insurance is an additional amount added to your monthly payment. It helps reassure the lender that you will pay your loan and if you default they have some security.
Buying a home is a very exciting time in your life. With a little planning and perseverance, you can reduce the stress that is often involved with financing your home purchase. Once you take care of the financial aspects, you can enjoy your time looking for your new home!