Almost people live paycheck to paycheck. That may be the norm but for people who are planning to buy a home, they need a better strategy. Investing in your own property can never be just a goal; the only way to achieve it is to make it a priority. Here are some doable tips on how renters can manage their finances to buy a home.
Work on Building a Good Credit Score
Building a strong credit is one of the best, and also one of the most difficult ways to secure a loan for your house. A good credit score shows a financial institution that you will stick to duly payments of your mortgage. A low score on the other hand easily disqualifies an individual for any sort of loan.
To assess where your score stands and how it is being affected, you can always request your credit report from AnnualCreditReport.com. Most of the time, people think they have good credit when they don’t. Other times, they have great credit and don’t realize it.
A credit score can always be improved. Start paying off overdue bills, pay all bills on time, cut the balance to less than 30% of the bill and make sure you have at least 3 credit accounts to show how you have done on them. Also don’t stack on a new account when you are applying for the mortgage, as it shows lenders that you are about to be under a lot of debt.
Show How Good You Are At Saving
A simple strategy is that future buyers make a budget and set a particular savings goal. If these people find that that they are able to save say $300 in one month, then they have $3600 to show at the end of the year. You must keep the habit of saving consistent. Lenders like to see a pattern of saving, where buyers need to provide first at least 3.5% of down payment.
While as a potential buyer you are increasing your savings, you should also be able to decrease your debt. As established above you must only have around 3 or 4 credit accounts to be able to build a good credit score, above that if you don’t need another account it is unnecessary. This way you are managing your money and maintaining a low credit balance.
By keeping an eye on your debt to income ratio you are ensuring a very important aspect of your loan approval. This ratio is what compares your minimum monthly payments on debt to gross monthly income.
There is nothing wrong with visiting a lender a couple of years before you purchase your own place. This way, borrowers know exactly what they have to do in order to qualify for a mortgage from that financial institution. You can also visit open houses if you like, in order to come up with a mental outline of the kind of place you need.