Plan Now to Buy a Home in Spring

If you plan to buy a home when the snow melts and the days turn to spring, now is the time to get ready. With a little forethought, you will qualify for a better loan and lower monthly payment.

Review Your Last Two Bank Statements

Ideally, your bank statement will be no longer than two or three pages. If your statement is longer, you can remedy that now before you are required to submit bank statements to the lender.

If you use debit for your purchases, use cash instead. Also, make sure you are not spending money on a daily basis.

Now is the time to go on a spending diet and save money for your new home. Here’s a good way to start…

Circle all charges related to eating out, including fast food, convenience stores, restaurants, and even  gourmet coffee. Now add up the total. Are you surprised? Should you and could you lower that amount by preparing more of your own meals and snacks? Can you save $50 per month? Some people can easily save $250 per month by altering their habits.

The sacrifice now to own a home is well worth the effort.

Next, look at other non-essential charges. Where could you cut back in the interest of getting into your own home? (Or your next step up home?)

Last, look at the ending balances. Is the balance trending upward? Underwriters like to see that you are living below your means, saving money, because the majority of the time, the house payment is higher than the rent payment. This is for your own sake as well, because owning a home comes with more expenses than renting.

Try the Home On for Size

What I mean by that is, set aside the amount of money that equals your new upcoming mortgage payment. Get used to living on less money now so that you don’t suffer payment shock later. Make sure you feel comfortable with the payment. If not, then you know now that you’ll need a smaller loan (and lower priced home) than what you might have imagined.

Avoid ALL Major Purchases

This is a big one, because it’s knocked out so many people from having their ideal home. You must not buy a new car, SUV, truck, or take on any new payment before closing on your house.

I’m thinking about one particular person who saved diligently for an entire  year and worked on repairing and improving her credit. She even hired a professional credit repair service. It worked and all was well until she “celebrated” by buying herself a brand new $40,000 vehicle. The next week when she applied for a home loan, she was stunned to learn she did not qualify. Tragically, she’d chosen to buy a vehicle (which  goes down in value) rather than real estate which increases in value. With the auto payment, she could no longer afford a home loan; thus, she sealed her fate as a renter for five more years.

Thank you for reading my blog.

For all the best tips on building a top tier credit score, see Build and Protect Your Credit Like the Pros here.

 

2 responses

  1. Hello Ms. Warren,
    How long would you recommend waiting to purchase a home after you have made a large purchase? I was forced to purchase a $48k vehicle in 2017 and my credit scores hang around the 640-660 area. They will improve once a major debt falls off hopefully next year and once I pay down my credit cards. Thanks

    1. LaMar, I would love to hear the circumstances that forced you to purchase a $48K vehicle as opposed to a vehicle at half that price. I hope you will reply.
      To answer your question, if your income can support both the vehicle payment and the mortgage payment, then you can buy a house now with a good FHA loan. FHA is very generous with debt-to-income ratio requirements, sometimes going up to 49% DTI.
      If not, then waiting one year is not a bad option. It gives you more time to get your finances under control and save for a 3.5% FHA or 3% conventional loan down payment.
      If you happen to be in CA or WA, I am licensed in those two states and would be happy to help you. http://www.wafirstmortgage.com/team/carolyn-warren/

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