Buying a home is probably the biggest purchase most people will make in their lives. Not only do you generally have to have some money to your name to start the home buying process, but it’s also something that most people will find themselves paying for the next 30 or so years of their lives. Because of the magnitude of this purchase, you’re going to want to be sure that you’re as prepared for it as possible. To show you how to do this, here are three ways you can prepare financially to buy a new home.
Work On Your Credit Score
Unless you’re very wealthy, you’ll likely have to take out a home loan in order to pay for your house. And if you’re like most people, you’re going to want to save yourself as much money in the long run as you can. One way to ensure you do this is by securing a home loan that is either as small as you can get it or that has a very low interest rate. To increase the chances of either of these things happening, Dana Dratch, a contributor to BankRate.com, recommends doing all you can to boost your credit score. If your credit score is above 750, you’ll be able to get the best rates on your home loan, which can save you a lot of money in the long run. So if you need to work to get your credit score up, start making those changes now.
To get a smaller loan amount from the beginning, the best thing you can do is put down a large down payment. According to David Weliver, a contributor to MoneyUnder30.com, you’ll need to put down between 3.5 to 20 percent on your home to qualify for a home loan. Depending on how much you plan to spend on your home, this down payment could be a very large amount of money. Additionally, there are other costs that you’ll need to pay when buying a home. Some of these include closing costs, costs of moving and more. So to make this process as easy as possible, you’re going to want to start saving as much as you can now.
Shop Around For A Home Loan
To make sure you get the best possible rates on your home loan, Miriam Caldwell, a contributor to The Balance, recommends that you shop around a bit before deciding on which lender to go through. Some options for home loans may include going through a mortgage broker, a small bank in your area, or a credit union. And once you’ve found the best terms and rates for your financial situation and get approved for the loan, the process of buying your new home will become much simpler.
If you’re planning to buy a new home in the next few years, use the tips mentioned above to ensure you’re financially ready when the day finally comes.