At New Home Programs, we know that purchasing a home is exciting and fun, but it can also be stressful. Making sure that you have your finances in order before you begin the home buying process can alleviate much of the stress and ensure you get the most home for your money.
Home-Buying Expenses
A home is always a big investment: recent analyses show that for most homeowners, the home makes up between one-third and three-quarters of their total net worth. While the home itself is the largest expense, there are other associated home-buying expenses to plan for.
Initial expenses include a down payment, closing costs and prepayments on homeowner’s insurance and property taxes. You may also incur other expenses for items such as repairs and homeowners’ association dues. Some long-term expenses to keep in mind include mortgage payments and maintenance.
Other common expenses that are part of a buying a home include hiring a home inspector, paying for a land survey, or choosing to buy down your interest rate for a more affordable home loan. A home inspection and land survey are typically a must, but opting to buy down your interest rate is at the buyer’s discretion. When you “buy down the rate,” you pay a fee to buy points off your interest rate in order to secure a better rate. This can be helpful in order to lower your mortgage payment, but it’s important to compare figures to determine if this is a financial benefit, which you can do through an online points calculator.
Strategies for Reducing Debt and Improving Credit
To improve your chances of securing a home loan, you may need to improve your credit and reduce debt. Track your expenses for a month to see where your money goes and determine if there is any way to reduce expenditures in certain categories. Then create a budget you can stick to. If possible, set up auto-pay for your bills to eliminate late fees.
Make sure to also check your credit report regularly, and dispute any errors that you notice. If you do not have any credit history or have gone through a bankruptcy, a secured credit card can help you build your credit.
Tools To Help You Improve Your Finances
Improving your financial situation can feel overwhelming. Fortunately, there are many tools available to help. Personal finance apps allow you to track your spending, and some even allow you to check your credit score and monitor multiple account balances. Personal finance books explain difficult financial concepts in understandable terms and provide helpful tips for saving money.
A homebuyer educational course, required for many financial assistance programs and some traditional mortgages, is helpful even to those not required to take one. There are a variety of courses available, in-person and online. The content generally covers topics such as home maintenance, how to prevent foreclosure, fair housing rules and other important concepts, all of which can help you avoid defaulting on your loan.
Homebuyer Assistance Programs
If you have difficulty saving for a down payment or improving your credit score, there are assistant programs available that offer specialized mortgages for eligible individuals and can assist with down payment funding. Prefabricated homes and units in multi-family housing are also options for those who want to own a home while minimizing purchase price.
Reducing debt and improving your credit score are two of the most important things to do before purchasing a home. With a little planning and studying, this is a reachable goal for anyone willing to put in the effort.
When you’re ready to take the leap into homeownership, turn to the team at New Home Programs to find the Texas home of your dreams.
Guest article written by:
Aging Wellness
https://agingwellness.org/