If you feel like you are throwing money away and would rather start building equity in your own property, you are not alone. Even though many renters would like to become buyers, finances are often a big concern. With some help and planning, renters can take steps now to prepare for home ownership in the future. Here are some ways you can prepare your finances and get into the life of home ownership.
- SAVE FOR A DOWN PAYMENT – Sourcing together your down payment is one of the first things you will need to get started on before you are able to buy a home. Unless you are eligible for a $0 down VA loan, chances are you will need at least some percentage of the home’s worth in cash. Saving money or bringing in more money can be challenging. It is important to get started on this phase early in the home searching process so you will have enough saved by the time you are ready to purchase your new home.
- REVIEW YOUR CREDIT REPORT – Lenders will use your FICO score to determine if you will be a safe borrower or if you may be risky. Getting your credit score in order is one of the most important steps you can take towards home ownership. A higher credit score could also help you score a better interest rate, so the earlier you work on improving your credit score, the more you could save in the long run.
- STOP MAKING BIG PURCHASES – Buying a house is expensive, so being able to show you are financially stable will help reduce scrutiny from lenders while you are trying to get approved for a loan. Lenders don’t like to see a flurry of recent big purchases. In addition to cutting back on big purchases, try to avoid opening up new lines of credit. Having multiple credit lines can be an indicator that you do not have the money you say and lenders could be less inclined to approve you for the loan you want.
- GET PRE-QUALIFIED – If you think you would like to buy, getting pre-qualified now can help give you insight into whether you are actually ready. Knowing how much you will qualify for, or even if you are eligible for a loan, can help reduce some stress later on, and help you search for homes in your price range. In the pre-qualification process, a lender will take into account your income, debts, assets and other details to assess how much they’d be willing to lend you. If your lender happens to uncover any red flags, you will get a clear picture of what steps you need to take in order to qualify for a loan. If you are going through the pre-qualification early, it will help ensure you have enough time to fix any issues before you are ready to become a homeowner. Once you are ready to buy, getting pre-qualified can help you be able to move quickly and make an offer as soon as you find your dream home. With pre-qualification under your belt, both agents and sellers will take you more seriously. It shows agents your are organized and fully prepared to be a buyer, and that you will be approved for the amount needed to buy a home you are making an offer on.
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