Financial Advice for First-Time Homebuyers

2018 may be the year you have finally decided to purchase a home. As you move ahead with your planning, understand that your current financial situation is a primary consideration above all else. Megan Wild, in a current edition of RISMedia’s Housecall, offers five financial resolutions which will enable you to attain your goal of becoming a homebuyer this year (Financial Resolutions That Can Help You Buy a Home in 2018).

  1. Make a Budget – Only 40% of all Americans have a budget. Be smart if you do not already have one. This will let you see monthly spending which is a necessity in order to determine how much of a mortgage payment you can comfortably afford to pay. Do not hazard a guess when it comes to discretionary spending. Most people believe they spend less than they actually do. You do not want to be living paycheck to paycheck so use an app like Mint to help you enter everything you pay for in a month. Add monthly needs such as rent and car payments as well as what you spend eating out. If you stay within your earnings, great! If not, consider coffee at home instead of Starbucks.
  2. Save, Save and Save Again – The most important thing you can do is save money for that down payment. Once you have the down payment, continue to save. You will need to have enough money for moving expenses and the other necessities that go into setting up a new home. Be sure to have an emergency stash in case you need to replace a light fixture or faucet for the bathroom sink.
  3. Establish a Clear Goal – In addition to a budget, you will also need to establish an overall savings goal. Once you have determined just how much your monthly expenses will be in your new home, decide what your goal will be. It is important in case of a sudden reversal, such as a job loss, to have at least six months of living expenses as a safety net.
  4. Get Your Credit Score – In order to be approved for a mortgage, the lenders are looking for excellent credit scores. The best scores range from 720 – 850. The average credit score in the United States is 679. Factors that will determine your credit score are history of debt payments, total amount of debt, length of credit history and number of credit sources. Know your credit score before you apply for a mortgage. The three main sources of your score are Experian, Transunion and Equifax. They will each provide a free credit score once a year.
  5. Pay Down Debt – It is vital that you pay down your debt as much as possible before buying a new home. First of all, the less debt you have, the higher your credit score will be. It will also enable you to receive preferential treatment from your lender and possibly lower your interest rate a few points. Secondly, the less debt you have, the more money you will have to buy the items you may wish to purchase for your new home as well as to put towards your savings goal.

As you plan for 2018 to be the year you finally purchase your home, remember to keep these resolutions top of mind. They will enable you to raise your credit score, lower your debt and ultimately reach your goal.

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