Step 1: Check your credit.
Your credit score is really important when it comes to buying a house. It's one of the major determining factors in regards to how much interest you'll be paying on your mortgage. You want to be sure you know what your credit score is before you apply for a home loan and you also want to be sure that you address any inaccuracies or resolve any issues. Even a half percentage difference in interest rates can potentially be worth hundreds of dollars each month and thousands over the life span of your loan.
Step 2: Pay down as much debt as possible.
Your debt utilization is one of the things that affect your credit rating. In order to maintain a good credit rating, you want to make sure that your debt utilization (or your debt to credit ratio) is low. This means paying down your credit card debt if you have any. Also, by getting rid of or reducing your credit card debt load, you'll be able to free up more money that can go toward savings for your new home.
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Step 3: Save for your down payment.
Before you buy a house, you definitely want to determine how much house you can afford and then start saving up for your down payment. Depending on the type of loan you qualify for, you may be required to provide a down payment of 10% to 20% of the total cost of the home you want to purchase. Since this is such a large amount, you want to build saving for it into your budget and plan out how long it will take you to reach your home savings goal.
Step 4: Save for other costs associated to buying a house.
A lot of times people forget that there are other costs associated to buying a home outside of their mortgage. Costs to consider include the cost of moving, the home inspection, the cost of home upgrades and repairs and the cost of maintenance over time. One of your goals should be to establish a cash cushion to support these costs that come along with you owning a home.
Step 5: Shop around.
Finally, shopping around for the right home and also for the lowest interest rate is a smart idea. Doing this will help ensure that you find and purchase a home you truly love and that you are paying the lowest amount of interest possible based on the loan amount you qualify for.
Becoming a homeowner is a great thing to do and these 5 steps will help you ensure you that you get the best possible home with the least amount of financial stress!
