It's time to move out and move on with your life and before you start your house shopping it's important to get your financial picture straightened out first. When you know exactly what you're dealing with financially it makes it a lot easier to do the house shopping without having any doubts on your mind about your savings and ability to pay the mortgage every month.
If you're a budget-minded person that is good with money and knows where every penny goes, you're probably thinking right now that this is a basic fundamental that everybody would be aware of. Unfortunately, if you are one of these people, you are actually one of the few that is on top of their finances. Most people aren't able to handle money properly, stick to a budget or even know how to prepare one. That is why so many people find themselves taking on too much mortgage and ending up with a higher debt than they can comfortably handle.
Here are the 3 tips that you should follow in order to "clean house" financially before starting your home search.
Put Together A Real Budget
If you're having a difficult time putting together a budget that really reflects your financial situation, schedule an appointment with a financial planner or your accountant. It's important to sit down and go through the numbers with someone that understands finances thoroughly and can keep you on track. The idea is to set up a realistic budget that you can follow and this is how you'll know exactly how much money can be spent on monthly mortgage payments.
Find Out What Your Credit Rating Is
Request a copy of your credit information from Equifax or Trans Union first before applying for a home loan. This will give you a chance to fix any outstanding issues appearing on your report that could possibly prevent you from getting a mortgage. Sometimes you'll find mistakes on the report that shouldn't be there!
Save Up for a Down Payment
Saving up for a down payment to buy a home can seem like an impossible task. However, reaching your financial goals may not be as challenging as you think. The key is to start planning and saving as soon as you realize that buying is in your future, and two to three years is ideal for the average family. An easy way to put away money for a down payment is to have a set amount of monthly income automatically dedicated to a separate savings account for that sole purpose.
Second, curb unnecessary expenses such as manicures, vacations, and dining out. These luxuries add up over time, and make a huge difference in your financial situation overall. Some individuals choose to sell off investments or borrow funds from their retirement plan to cover the down payment, and some even consider getting a second job.
Affording the House You Want
If you're thinking about getting a new house in a certain neighborhood with four bedrooms, two baths and a large yard for your dog only to find out that you can't afford it, you'll need to turn to plan B. It's always important to have a plan B set up and then a plan C, D and E. this way you'll have realistic expectations that you can follow should one of the plans not materialize for one reason or another.
It all comes down to planning for the future, knowing where your finances are in present time and working with a budget. When you have these 3 basics in place it makes things a lot easier when it comes time to shop for a house.