You have your eyes set on a few lovely new homes and you hope that one day soon, there will be a house that will be the place you and your family live. If this is your first time buying a home, you are bound to feel a little excited and nervous all at once because this is such a major financial move. To ensure the process goes as smoothly as possible, it is best to start planning for your home purchase months in advance. Take a look at these five best financial practices to follow before you buy a home.
Get familiar with your credit score
Your credit score will be discussed in great detail with a lender before you can get a loan. You should know your credit score and anything on your credit report that may not look so good in the eyes of a lender. Once you know your score, start working on bringing it up as much as possible before applying for a mortgage.
Don't make any huge purchases or take on any new debts
Major purchases that reflect on your credit report may not be a desirable attribute for some lenders. In fact, some lenders balk at the idea of a borrower who is taking on too many new debts at once. It is a smart move to only make decisions that will bring your credit score up and keep your total running balances low.
Talk to lenders
One of the most important things to do when you are considering buying a home for the first time is to get really familiar with how the mortgage process works. You will want to know about things like down payments, closing costs, and mandatory inspection fees. Ask lenders about their interest terms as well.
Get pre-approved for a home mortgage
After you have talked to several lenders and understand what they have to offer, pick a select few that have the best terms to offer. Go ahead and see if you can get preapproved for a mortgage loan through these preferred lenders. Knowing that you are approved—and for how much—makes shopping for your new home an easier process.
Eliminate small debts you are still paying on
That little credit card balance you've been working on, the last payment or two on your car, the medical bill you've been working on—before you buy a home, it is a good idea to eliminate these payments. Not only will it give your credit score a boost, which can get you a better mortgage rate, but it will free up your cash flow so you will have more money to designate to your monthly mortgage payment or homeowners insurance.