It’s still an American dream and for good reason. Owning your home provides pride of ownership and financial stability. Put yourself in the best financial position to buy—before you start looking—by doing these three things:
- Improve your credit score.
Your credit score plays a major role in your ability to secure a mortgage and what interest rate for which you’ll qualify. A better credit score means you’re a lower risk and financial institutions are able to give their lowest interest rates to borrowers with great credit.
Find out what your credit score is and how to improve it. You are entitled to a free copy of your credit report annually from each of the credit reporting agencies (Equifax, Experian and TransUnion). You just have to call and ask. For instant access to your credit score, and some great tips on how to improve it, open a free account online at www.creditkarma.com, where it’s free to check your credit score anytime you like.
If your score is lower than you’d like, take steps to improve immediately. You can pay off outstanding debt to improve your score. Search online to find tips to improve your credit score.
- Fine-tune your monthly budget to save a large down-payment.
Buying a home is an earned privilege that requires smart financial planning and some sacrifice. The reward is worth it. Paying down a mortgage provides an investment in your future as you gain equity ownership. The alternative of paying monthly rent is spending money that provides no long-term financial benefit.
If you don’t have a monthly budget, create one now. There’s an apps for that! Be thorough when creating your budget—chances are high that you’ll find ways to cut expenses that don’t cramp your lifestyle too dramatically. Skipping that $3.50 a day latte will save you $1,260 in 12 months. Cutting back a few channels on your cable TV could easily save you $85 a month which equates to $1,020 a year. Dine out less frequently and you’re sure to save a lot of money. What about that smartphone bill? You should revisit your cellphone plan to see if you’re paying for add-on services you don’t need or use.
You will need to save between 5 – 20 percent of your new home’s purchase price as a down-payment. If you’re looking for a $200,000 home, that means saving at least $10,000. You can find easy-to-implement tips on saving money. A little sacrifice and smart planning can get you there!
- Get pre-approved for a mortgage.
Often overlooked but the first step to take, you should visit a mortgage lender who will help you figure out how much house you can afford. Don’t frustrate yourself and everyone else involved in the process by assuming what price range your budget allows and looking at homes outside your financial reach. Your local bank branch likely has a mortgage lender on staff to meet with you or of course there are a lot of online lenders to check out. Features and interest rates vary so it’s important to do your due diligence before deciding on a mortgage company, but most are happy to meet with you on a no-obligation basis and educate you on what’s involved while running your numbers through the pre-approval process.
Don’t hesitate to ask questions about how different types of mortgages work so you gain the insights you need to make an informed decision and hone your home search criteria. Once you have your pre-approval letter, it’s time to find a real estate agent who can help you find a high-quality home at a budget-friendly price! I’m intimately familiar with the Howard and Baltimore county markets and it would be my privilege to show you what’s available. I’m also happy to share top-quality mortgage lender recommendations with excellent products and service.
Ruth Lyons is a realtor with Sachs Realty in Columbia. She’s been investing in real estate for decades and she works with both buyers and sellers. She loves demystifying the process so everyday people can buy and sell homes with confidence. You can reach Ms. Lyons at 443-745-4806 or rl@sachsrealty.com