Preparing to buy a home requires you to take a thorough assessment of your finances. Arguably the most critical aspect of buying a home, financing must work seamlessly, or you could lose your chance.
Knowing how to ready your finances for this big investment can help you feel more confident. Thorough preparation can also reduce your risks and improve your home-buying experience.
Budget
Just because you can afford a specific home might not make it your best choice. Spending all your money on a house leaving little left over could jeopardize your financial stability if you experience an emergency. Think reasonably about how much you can afford to pay for a mortgage. Think ahead, past the initial purchase, and toward your ability to make payments on time.
When thinking about your budget, you will also want to account for the following:
- Landscape costs
- HOA fees
- Closing costs
- Renovations
- Inspection fee
Down payment
Having funds set aside for a down payment may reduce your PMI. Generally, a down payment of 20% or more will prevent PMI payments which can save you a lot of interest money. If you plan to sell your current home before buying another, consider putting any equity you have toward a down payment for your new home. According to U.S. News, having funds for a down payment is often something lenders favor, which could make your offer more appealing than other buyers.
Pre-approval
Getting pre-approved is another way you might consider readying your finances. If you meet all the requirements, you can show exactly how much funding you have received approval for. This could improve your standing with lenders and potentially speed up the buying process.
Real estate is a highly competitive market, and you might not be the only person interested in a home. Having your finances in order could make a considerable difference to the success of your outcome.
