Get Your Financial House in Order Before House Hunting
With housing prices approaching 2002 levels, and mortgage rates hovering near historic lows, this may be the best time to strike your best deal for a new home. Sellers are anxious to sell, but buyers are still hiding in the shadows, so it’s a buyer’s market. Lenders aren’t quite so anxious to lend as they once were, so, it you’re in the market for a new home, your best move is to get pre-approved right now.
Getting your financial house in order is the first critical step. Assuming you have your down payment ready to go, it’s time to shore up your finances and work on your credit. Here are the two most essential action steps to take right now:
Put your family on a budget. If you’ve been saving for a down payment, you will also need to save for additional needs such as an emergency fund to cover housing maintenance and repairs. If you’re buying a home for the first time you need to plan for additional expenses. Prioritize your spending now as if you are already incurring the extra expenses involved in owning a home.
Pay down your debt. To maximize your credit score you will need to get your debt ratio below 30%. You won’t qualify if your total debt/income ration, including mortgage, exceeds 38%. Fix your budget now to include extra debt payments. Do not incur any new debt budget so you are on a 100% cash basis.