Blog For Noob Random thought of a Noob Blogger
Buying a house is a big step. Excitement levels can run high, and you may be impatient to start finding the perfect home for you and your family. However, there are a few prudent things that you should do first. Be sure to tackle these three steps long before you head out to an open house.
1. Check Your Credit Score
Even a small change in your credit score can have a big impact on a future mortgage payment. Before you start applying to check your credit report and make sure it is accurate. Work to remove any errors. If a low credit score is caused by poor financial management, credit education provides you the tools to improve your situation. The earlier you start the process of improving a credit score, the better you will be positioned for a favorable interest rate, so do this early.
2. Develop a Realistic Budget
If you don’t have a formal budget laid out in black and white, now is a great time to develop one. Save receipts from every purchase made during this time and go through financial statements for the past year and pick out less-frequent payments. Start a spreadsheet or list where you can keep all of your income and expenses sorted and accessible. Once you have the necessary information, you can begin to build a realistic household budget. Using an online calculator, like this one that uses the 50/30/20 budget rule, can help.
3. Pay Down Existing Debt
Work on a plan to eliminate any debt you already have. Things like student loans, credit cards and personal loans can strain a monthly budget, which will make paying for your new house more difficult. Both the debt snowball and avalanche methods are popular among financial experts.
Developing a sensible and realistic budget, paying down your debt and getting your credit in order will help you secure an attractive interest rate. That will leave you better prepared for homeownership.
