Preparing to Purchase a Home: 5 Financial Tips

Thinking of purchasing a new home? It’s never too early to get your financial situation in tip-top shape! Preparing to buy a home takes organization and commitment, but by making small changes you’ll find that the road to homeownership will be smoother and less stressful in the long run.

Here are 5 helpful tips to keep in mind when preparing to buy a home:

Review your credit report

Whether you’re thinking of purchasing a new home or not, reviewing your credit report for discrepancies is always a good idea. Check with any of the three major credit reporting agencies Experian, TransUnion, and Equifax – to obtain your credit report. By doing this in advance, you’ll allow yourself time to clear up any mistakes before you’re ready to apply for a mortgage.

Pay your bills on time

Your payment history is a major component of your credit score. It’s one of the most important factors when it comes to securing a mortgage or other types of credit.

To manage your bills and avoid late charges, try setting up auto-pay, scheduling the same day on your calendar each month to pay the bills, and consider bill reminders via email or text. Find whatever works for you and get in the habit.

Don’t open new lines of credit

It might be tempting to open that department store credit card to save 20% on your purchase, but opening too many new lines of credit in a short period of time is considered a risk and could lower your credit score. Also avoid making any large purchases using credit prior to applying for a mortgage.

Don’t close unused accounts

By closing old credit card accounts you’ll risk lowering your credit score, as this will reduce your available line of credit. Keep your oldest account open to preserve the length of your credit history. Wait until you’ve moved into your home before closing accounts and spread out closures over time.

Save your dough!

It’s critical to start budgeting as early as you can, so you can start putting away money for a down payment – the larger your down payment, the lower the risk (at least in the eyes of the lender). Try cutting back on your coffee runs 3 times a week, spend less on clothing and shoes and other unnecessary goods, eat out less often, set up a dedicated savings account and start a direct deposit.

Although these might seem like small steps, you’ll reap the rewards in a big way. With proper planning, you’ll find the path to homeownership will be easier than you first thought.

TBI Mortgage, a subsidiary of Toll Brothers, contributed to this story.

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