So you’ve decided it’s finally time to buy your first home.
It’s a big step and requires a lot of preparation to ensure it goes as smooth as possible. To help we’ve put together these 5 tips for getting ready to buy your first home.
Give yourself a big head start by taking a few months to a year to get your affairs in order. Having a some time to make sure you get all your bases covered makes a big difference.
Even if you don’t have a year to wait, you can still accomplish a lot and increase your chances of getting that home loan.
Here’s some tips.
1.) Find out your credit score–
The most important part of getting your mortgage loan is your credit score. There are three major credit reporting services, Experian, TransUnion, and Equifax. Most lenders will look at all three and take into account your middle score. Problems on your credit report may cause you to have higher interest rates or prevent you from getting a loan at all.
Verify your credit report is accurate and use the information to improve your credit score.
2.) Do what you can to boost your credit score-
Your credit score indicates your creditworthiness and the three digit number will be a major factor in determining your loan eligibility and your interest rates. Since your credit score plays such an important role you should do what you can to boost your credit scores.
Here are a few basic tips for improving your credit:
– Check Your Credit Report for Delinquencies
– Clear Your Report By Contacting Creditors
– Continue to Pay Your Bills on Time
– Keep your balances under 35% of your credit limit
– Set Up Reminders to Stay on Top of Your Report and Score
You can protect your credit score from mistakes and fraud by enlisting the help of a credit monitoring service. You will receive alerts when new information appears on your credit report so you can verify it or refute it.
Know your credit score and keep an eye on it. You don’t need surprises when you’re trying to get your first home loan.
3.) Eliminate Bad Debts-
Make sure to pay down bad debt like credit cards as much as you can. If you have student loans, get them current (or deferred). You don’t want to appear like you live beyond your means or can’t pay your bills. Another major factor of getting a loan is your debt to income ratio, or how much you earn vs how much you spend. Generally you want this number to be under 50-55%.
Your amount of debt will have a lot to do with loan eligibility. If you already look financially overextended or on the brink, your chances of getting approved for another major loan are slim.
4.) Save Your Money-
You’re going to need a good down payment for your new home. Usually at least three-five percent for FHA loans and more on conventional loans. The more you have to put down the better. The bigger down payment you make the more options you’re going to have and the better interest rate you will get.
You will also pay for closing costs which are usually 1-3% of the purchase price.
Set savings goals and meet them by eliminating expenses where you can. Put your lifestyle on hold while you try to reach your goals (What we mean by this is don’t go buy a new car and rack up your credit cards when getting ready to buy a house). When you’re living in your new home, all your hard work and sacrifices will pay off.
5.) Pay Your Bills On Time-
Late payments can damage your credit rating. Not what you need when you’re in the market for a home. Come up with a system that works for you. You can even set up automatic payments to make sure your bills get paid on time.
These are just a few things to take into consideration as you navigate the experience of purchasing a new home or condo in San Diego.
If you have questions feel free to contact us
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