The One-Year Finance Plan for Anyone Getting Ready to Buy a House

Buying your first home is a monumental step, however it doesn’t come together all at once. If you think you are ready to make the leap from apartment to home, there are a few ways to organize your finances and plan ahead so that the process goes smoothly when you are actually ready. If you are thinking about purchasing a home in the next 12 months, there are a few steps that will fully prepare you for what lies ahead. Keep reading to get a few tips to help you formulate the perfect plan for buying a home.

Do a Credit Check

To get the best rate on a loan, a lender is going to want to see a credit score of at least 700. If a potential buyer does a credit check 12 months prior to applying for a mortgage, it makes it easier to take steps to pay down credit debt or reduce a high debt-to-income ratio to increase a buyer’s credit score quickly. You might lose out on your dream home if your credit score is less than impressive when you are ready to buy—at that point there won’t be much you can do to improve the score.

Determine How Much to Spend

It is important to set a spending limit long before starting the house hunting process. This will narrow down the neighborhoods to shop in as well as set expectations for what a buyer can get at a certain price point. Creating a budget that includes extra costs like home insurance, a down payment, and any renovations or furnishing will help you get a good idea of what you can afford. You might casually look at homes for several months before you truly start to “house hunt.” With a budget in mind, you’ll avoid looking at any homes that are out of your price range.

Decide the Type of Loan to Use

A first-time buyer may decide to use a government backed loan such as an FHA, VA or USDA loan. These loans have low down payment requirements as well as down payment assistance available. Conventional loans may require down payments of as large as 20 percent of the purchase price. Once you have determined your budget, you can speak with a loan officer who can help you decide the best loan for your needs and current financial situation.

Figure out Where Money Is Coming From

Where is the money coming from to cover closing costs and the down payment? Knowing ahead of time about possible credits or grants available for first-time buyers or whether or not lenders will be willing to help you pay for the house impacts the budget and what type of loan terms a buyer can get. Any income should be factored into your budget so that you can be sure that you are able to pay for your regular expenses on top of the costs associated with your new home.

Don’t End Current Employment

Lenders want to see that a borrower has been employed for at least two years or has continued employment with at least 30 days on the job. Therefore, do not quit a job or apply for a loan while unemployed. Even if it’s a temporary situation, this could make a borrower look like a bad risk to a lender and make it tough for you to get proper funding. If you can help it, try to stick with your current job until things with the home are finalized—and then you can venture out to other options.

When looking for a home, it is important to understand what it takes to gain mortgage approval and ensure that a buyer can find a desirable and affordable property. By determining ahead of time how much to spend and what loan to apply for, a buyer can go through the home purchase process with as little drama as possible. Start your planning in advance, and you’ll have a much easier time navigating through the home-buying process.

The information for this article was provided by the professionals of Underwriters Insurance Brokers Ltd. who specialize in home insurance and tenant insurance in Vancouver.