Whether you’re buying your first home or upgrading to a new space, doing your best to boost your credit score and keep your mortgage payment manageable will improve your quality of life as well as your enjoyment in the house.
1) Get Pre Approved
For first time homebuyers, get online and get preapproved before you start looking at houses. Keep an eye on your credit rating as you work through the preapproval process, and if it seems low, order a free copy to study it so you can determine where the problem areas are.
If you can’t get preapproved for a mortgage, you can still buy a home. For example, you can contact your landlord about a rent to own setup in your current home, or search for owner-carry sale options. Be aware that you will still need a sizable down payment to buy these homes. Hire a real estate attorney to help you review the paperwork.
2) Work to Improve Your Credit Score
If your credit score is blocking you from buying a home, consider making some major changes to your finances. Once you’ve been through your credit report, you may need to hire an attorney to help you get old charges that have been sent to collections. No matter what your credit problems have been in the past, be aware that cleaning up your credit will take some work.
If your report is accurate and you’ve taken care of collections problems, you may find that your debt to income ratio is still too high. There are changes you can make here as well. For example, you can borrow against a retirement account to wipe out your high interest debt. Once the high interest debt is gone, you may have much more money available than usual. Consider splitting those dollars between your next smallest debt and your savings account.
3) Buy A Home, Not A Project
It’s very tempting to fall in love with a home that needs some TLC. However, a fixer-upper home can quickly get overwhelming. Unless you have a lot of flexibility in your schedule, try to purchase a home that needs only cosmetic changes to suit your tastes. Renovating can be exciting, but living in a renovation can quickly become a nightmare, particularly if you have small children. Buy a home you can live with for now. Spend time finding out what works, what doesn’t and make your plans for changing things in years to come when your kids are a little older or you’re closer to retirement. Plus, by then you will have equity available so you can borrow from yourself to make big improvements.
4) Try to Buy a Small House in a Big Neighborhood
If you are single or your family is small, talk to your realtor in Beaumont Texas or your particular locale about buying small in a high end neighborhood. Such a house may need some immediate work to boost the curb appeal, but if you can settle in a small place comfortably, your home valuation will likely climb as your equity builds. When you’re ready to expand your home, you’ll have access to the funds necessary to do it right.
5) Don’t Aim to Buy What You Qualify For
When you prequalify for your mortgage, you may be surprised at how much lenders are willing to offer you. If the number is surprisingly high, take care to sit back down and look at your numbers one more time. Never buy more than you can afford, even if the lender thinks you can afford it. Your mortgage payment should be less than 28% of your monthly pre-tax income. If you can get it lower and find that you have money left over at the end of the month, you can save for a planned expansion or put extra against the principal.
Buying a home can be an exciting time. At the end of the transaction, make sure that you own a home you can enjoy, easily pay for each month, and grow into. Make cosmetic changes that will make you smile each day when you walk through your house. Save the big changes until you’ve determined exactly what isn’t working and why.
