pro finance blog
Menu
  • About Me
  • Hire Me
  • Contact Me
  • Submit a Guest Post
    • Privacy Policy
    • Disclaimer
Menu
Finances Ready

Getting Your Finances Ready To Purchase A Home

Posted on January 11, 2020January 16, 2023 by Tina Roth

Buying a home is a bold step that elicits various emotions. Other than happiness, you may feel anxious because it’s one of the most significant decisions you’ll make in your life. Before committing to a purchase, you should do detailed research on the process. This is especially crucial if you’re a first time home buyer.

How To Prepare Financially For A Home Purchase

This life-altering decision is influenced by factors such as your budget, family size, location, desirable amenities, and future needs. Once you have these defined, determine whether your finances are in order by taking the following steps:

#1 Review Your Credit Score

A good credit score improves your chances of getting a mortgage at favorable terms. It shows potential lenders that you’re capable of repaying it, while also helping them set a loan pricing mechanism.

You can access your credit report at a fee from TransUnion, Equifax and Experian. This service is accessible for free once a year from AnnualCreditReport.com. Your credit card provider or lender might also offer it for free, depending on your type of account.

#2 Reduce Your Debt

Paying down or eliminating debt makes it easier to manage a mortgage. Lower debt means an improved credit score, which attracts lower interest rates. The first step is to list all of your financial obligations.

These include credit card, medical and student loan debts, auto loans, utility bills, and payday loans. Although paying off debt isn’t easy, there are various ways of doing it. Two of the most popular ones are debt avalanche and debt snowball.

#3 Budget for Your New Home

These include credit card rates, utility bills, cable TV and phone subscriptions, maintenance costs, and repairs as well as one-off payments such as purchasing an alarm house system to keep you and your new home secure. According to financial experts, you should set aside up to 25% of your take-home pay towards servicing your mortgage. If you don’t have any significant debts, this amount can rise to 30%.

#4 Look for A Suitable Mortgage Lender

Mortgage rates vary from one lender to another, depending on various factors. Shopping around could save you thousands of dollars in annual payments. Once you have a favorable credit score and a suitable debt-to-income ratio, it’s time to study the lending landscape.

Key players include mortgage bankers, credit unions, savings and loans (S&Ls), correspondent lenders, and mutual savings banks. You can check with the Nationwide Multi-state Licensing System Registry to confirm that a particular lender is legitimate. The Better Business Bureau also contains genuine, objective reviews on various lenders. Going through them will help you choose one with the best possible mortgage services.

#5 Get Pre-Approved

Getting a mortgage pre approval letter is beneficial because it shows potential sellers that you’re serious about purchasing a home. This gives you an edge over other buyers when bidding for a house. It also saves you time later on when you decide to make an offer. That’s because lenders already have the necessary financial information they require to process your loan. This includes:

  • Salary and employment details.
  • Your social security number and those of any co-borrowers.
  • Savings, investment, bank, and checking account details.Outstanding debts such as credit cards, student loans, and car loans.
  • Two years’ worth of tax returns, including W-2 and 1099 forms.
  • Details about the down payment you’re willing to make, as well as the source of those funds.

It’s advisable to get pre approval letters from various lenders. This gives you the chance to compare their loan estimate forms and determine the ones that offer the best terms.

#6 Save For a Down payment

In the past, lenders required a down payment of 10 to 20% before advancing mortgages. Today some offer 100% financing. You’ll be required to pay for private mortgage insurance (PMI) if your down payment is 20% or less.

Such mortgages are considered high risk, so PMI insures the lender against possible defaults. PMI ranges from 0.5 to 1% of the borrowed amount. The rate you receive depends on factors such as your income, financial background, and credit score.

A down payment of 20% or more offers several benefits, including:

  • Starting with a smaller loan balance.
  • Reduced interest expense.
  • Lower mortgage insurance premiums.
  • Manageable mortgage payments
  • Paying lower mortgage rates. The higher your down payment, the lower your loan-to-value (LTV) ratio is.

#7 Compare Different Mortgage Lenders

Starting your search online will show you some of the best mortgage rates in the market. Remember, these are estimates. The actual rate you’re offered will depend on your credit information and overall financial standing.

Having several quotes allows you to negotiate rates that make financial sense to you. There are also several online mortgage calculators to help you calculate your repayment schedule, rates, and associated costs.

#8 Hire A Realtor

A skilled realtor can make a massive difference in the amount you pay for your new house. That’s because they know some information that you might not be privy to. Experienced realtors can help you negotiate lower rates, or tell you whether the house you’re buying is worth its asking price.

Once you get pre-approved, it’s easier for your real estate agent to find a house that fits your budget and needs. They can also give informed opinions on some essential requirements related to the purchase. These include home inspections, tax obligations, home insurance providers, and potential repairs.

The best way of finding good realtors is through recommendations from friends and acquaintances. Most listing sites also allow users to review real estate agents they worked with before.

These tips will come in handy when planning your home purchase. If you’re looking for practical financial advice, the pro-finance blog is your answer. We offer high-quality articles addressing the biggest money-related problems. Contact us today for more details.

Category: Personal Finance

Leave a Reply Cancel reply

You must be logged in to post a comment.

About Me

finance blogger

The idea of starting a blog has been hitting me for long; I took it seriously after falling into a spiral of debt and recovering from it.

I have been anxious all through the financial difficulties. I see that same anxiety in the eyes of people, whose ill fate has put them at odd with financial repose.

It makes me compassionate. Out of this compassion and goodwill, I started this blog. I wanted to help all those, who are facing financial distress..




  • Stock Market
    Understanding the Gov Tech MarketFebruary 16, 2023
  • Phuket Real Estate
    Why You Should Invest in Phuket Real EstateJanuary 24, 2023
  • Corporate Governance
    Corporate Governance: What Are the 3 Core Principles of Good Corporate Governance?December 17, 2022
  • Successful Retirement
    How To Plan For Successful Retirement At 50: 5 Steps To Get Started OnNovember 4, 2022
  • Online Money Transfer
    Do You Still Transfer Money Internationally With Your Bank? There Are Better Online Solutions For ThatOctober 14, 2022
  • finance
    Important Roles of the Minister of FinanceSeptember 16, 2022
  • Avoid for New Businesses
    5 Forecasting Faux Pas to Avoid for New BusinessesSeptember 16, 2022
  • Affecting Pensions
    How Inflation Is Affecting PensionsSeptember 2, 2022

    ProFinance Blog is dedicated to help people who are struggling with their personal finances. We have learned the lessons first hand and know how real the struggle is. Being compassionate about the personal finances and blogging about is our way to help people know more about different situations and how effectively they can handle it. So take control of your finances now and take actions towards gaining financial freedom and security. Join us in the mission to self-educate, learn and help others by sharing valuable information on finances. Here you will find information, tools and techniques on various aspects of finances and learn how you can use the information and implement it to make your financial life better than ever.Join us in our mission to financial freedom.

    • Stock Market
      Understanding the Gov Tech Market
    • Phuket Real Estate
      Why You Should Invest in Phuket Real Estate
    • Corporate Governance
      Corporate Governance: What Are the 3 Core Principles of Good Corporate Governance?
    © 2023 ProFinance Blog | Powered by Minimalist Blog WordPress Theme