Investing in a new home is a huge commitment, and as you prepare to make that commitment, it’s important to make sure your dollars are working as hard as possible for you. This is why it’s wise to create a home purchasing checklist that covers a number of financial factors, including your credit score. In addition, if your credit score is low, you will want to invest some time in credit repair so that your financial strength will be at its peak when you’re ready to take that big step of committing to a mortgage. Here are eight items that should be on your home purchasing checklist:
- Define the house of your dreams. Your home is something that you and your family will use every single day, so it’s important that it meets your needs. Make a list that includes everything you need in a house, and don’t forget to include the neighborhood and schools on that list. Then take a look at how much that house of your dreams would cost.
- Create your budget. Is this house of your dreams within reach? An important first step in determining the answer is to create a budget, based on what you’re already paying every month, what kind of down payment you can afford, and what your potential mortgage payments would be. If you can afford it, set your budget for a little less than your maximum preapproval amount, so you have some flexibility to make improvements or take a vacation now and then.
- Contribute to your savings. The higher a down payment you can make, the better a mortgage you’re going to be able to negotiate, and the lower your monthly mortgage payments will be. It’s never too early to start giving your savings a boost.
- Check your credit score. Your credit score can make a big difference in your interest rate, so it’s important to bring that score up as much as possible. Get a free copy of your credit score from one, or all, of the credit bureaus (Equifax, TransUnion and Experian), and make sure there are no errors. If you find that something needs correcting, speak with the creditor and request that it contact the credit bureau with the correction.
- Curb your credit card spending. In the months leading up to your big purchase, you will want to dial back on your credit card spending and pay off as much of that debt as you can. This will not only raise your credit score, but also help you learn to live on less, which will help make those mortgage payments easier.
- Figure out your monthly payments. If a lot of your monthly payments are going toward debt, it’s going to be harder to get a good mortgage offer. Lowering your monthly payments will make you look more attractive to loan officers. You can use a lower-cost balance-transfer credit card to help.
- Get a preapproval letter. When you’ve taken care of raising your credit score, bumping up your savings and curbing your spending, getting a mortgage preapproval letter will show that you’re serious about that dream home. The letter will also help when it comes to negotiating a good price for the home.
- Revisit your dreams—if necessary. If you find you’ve done all of the above but still can’t make the math work to buy your dream home, take another look at your desires and see if you can’t make some compromises. That way you can still buy a home that will work for you and your family.
If you get to No. 8 and find you have to revisit your dreams, you also have the choice of asking for some help with credit repair. If your credit score is holding you back, or forcing some changes to your dream home, contact Ovation today and let us help raise that score so you can afford the house you’ve always wanted.