Home Owning: A Comprehensive Plan
Owning a home is a big step in your financial life. It requires patience, planning and a dedication towards saving and budgeting. While there are many things that go into owning a house, there are four key factors that one must consider before going house shopping. You must know where your credit stands, where your savings stands, how your monthly budget affects your finances, and whether your income is stable enough to handle home ownership. We’ll go over these points to prepare you for your dream of owning a home.
Know Where Your Credit Stands
Being aware of what your credit report says is a big factor in your ability to purchase a home. Generally, a low credit score may prevent you from receiving a mortgage loan. When lenders view your FICO score, they get an idea of how responsible you are with your credit. Therefore, it can be detrimental to have negative information on your credit report in any fashion. Knowing what exists on your credit record is the first step towards eliminating a major obstacle in the process of home owning.
Make sure you take advantage of your ability to check your credit report for free every year through www.annualcreditreport.com. Once a year, you have the ability to check your credit report from all three major credit bureaus. While you will not receive your FICO score with your credit report, you will have a great idea of the information that creates your score. You can also see if there is any incorrect or fraudulent information that needs to be addressed.
Having a functioning knowledge of what’s on your credit report can go a long way when deciding whether to try to purchase a house. Instead of taking a chance with a poor FICO score or questionable information on your report, taking the time to correct misinformation or to improve your FICO score can create a better opportunity for home ownership. The sooner you act on your credit health, the sooner you can set yourself up for a positive home buying experience.
Have a Savings Account
It might seem vague to simply mention having a savings account, but a savings account can go a long way in the purchase of a house. When looking to make a large purchase such as this, one thing that can help alleviate the potential debt you may incur is making a large enough cash contribution towards the sale. The more cash you can contribute, the less credit you’ll need to dedicate to the purchase. This can lower your monthly payments, lower your interest payments, and lessen the amount of time it takes to completely pay your house off.
While it is still a good practice to know about and work on your credit, making a substantial cash contribution can help make up for a less than stellar credit report. Having as much money as you can to contribute to your house will also allow you to allocate more funds towards its upkeep and furnishing over the first few months and years of ownership. It can also help to begin (or add to) an emergency savings fund. This fund can help to pay for monthly expenses should there be any unforeseen financial setbacks.
A savings account can also help with an unstable source of income. Making big choices with your source of income can have monumental consequences if you plan on owning a home in the near future. Having multiple ways to handle your expenses (including your mortgage) is important enough to be a priority. The last thing any homeowner wants is to face foreclosure due to missing mortgage payments. Alternate incomes, saving accounts and investments can all help to deal with mortgage payments should a main source of income become unavailable.
Consider Your Existing Budget
If you’ve saved enough money to handle a decent portion of your mortgage and you have a savings account left over to handle any surprises, you might still have to consider whether your monthly budget can accommodate a monthly mortgage payment. This can be a deciding factor as to when you’re able to pursue home ownership status. If you have no space to comfortably add a mortgage payment, consider increasing your initial payment to help shrink your monthly mortgage payments going forward.
Your budget will come into play with anything that you choose to pay for, be it for a car, house or other large purchase. The difference between many other purchases and a house is the length of time spent to pay it off and the importance behind staying on time with the payments. While losing your car from missing payments can be devastating, some would argue that losing your house is much more impactful and can pose a more immediate problem. Needless to say, staying current with your mortgage payments is of great importance.
It can be an exciting and stressful time when looking to purchase a home. If it’s your first home or your third home, the feeling of planning, saving and eventually paying can be an exhaustive experience. It can all be made even more stressful if you deal with large amounts of unsecured debt. Harboring credit card debt, medical debt or old personal loans can hinder your aspirations to eventually own a house. Guardian Debt Relief can help you rid yourself of this debt through debt settlement. Don’t let debt stand in the way of your dream of being a homeowner. Take the first step towards settling your debt and contact Guardian Debt Relief today.