Are you tired of renting? Want to enjoy pride of ownership that comes with having a place you can call your own? The road toward home ownership for first-time homebuyers or repeat buyers can be a pleasant journey filled with excitement and anticipation. On the other hand, it can be a frustrating trip down a bumpy road, filled with detours. The difference on how you get there is planning, and you’ll need lots of it. Becoming a homeowner means doing your homework weeks, if not months in advance. From getting your finances in line and building good credit to saving for a down payment and getting pre approved for a loan, knowing the steps you must take today will help you become a homeowner tomorrow.
Organize Your Financial Standing: The first step toward becoming a homeowner is to take a hard look at your financial house, so you can see where your money goes. Track your spending by receipts, checkbook or computer software. Once you’ve identified your spending habits, you’ll know where and what you can cut back or do without. Apply those savings to your down payment and an emergency fund. To keep your debt under control, charge only what you can payoff in a month or two. Also, focus on paying down your credit cards or other unsecured debt, starting with the highest interest rate first.
Improve Your Credit Worthiness: Once you’ve got a handle on your budget, take a look at your credit. The first thing lenders check is your credit worthiness. They do this by looking at four categories of your credit: capacity, character, capital and collateral. I suggest checking your credit report and credit score before applying for a home loan, so you’ll get an idea what lenders will see. Remember, positive information stays on your credit report forever, while negative information, including bankruptcies, will remain for up to 10 years. You can improve your credit score by paying bills on time, reducing credit card balances and keeping your balances below 50% of the available balance. You can obtain a FREE credit report each year from the three major credit reporting companies at www.annualcreditreport.com
Buying Power And Pre Approval: Once you have your finances and credit in order, you’ll need to consider how much home you can comfortably afford. Knowing your buying power depends on how much money you can provide for a down payment, as well as your total income and other financial obligations. This is your income-to-debt ratio. Obviously, the more money you put down up front, the lower your monthly mortgage will be. I strongly encourage all of my clients to converse with at least three to four lenders. Let them know your comparison shopping for a loan and intend to speak to a number of lenders or banks. Request a “Good Faith Estimate” from each lender, this is a cost breakdown in writing of all fees that lender charges. Follow this step and you’ll end up saving yourself thousands of dollars in the long run. Lenders want your business and some of the fees they charge will magically disappear when there’s competition involved. The eventual lender that you have chosen can provide a pre approval letter. Each of these steps are vital before starting your home search. Please visit my website at www.JohnnyBrooksHomes.com for helpful tips on buying or selling a home, scan my other informative blogs and easy access to view local area homes for sale in Davis, California and the surrounding communities.