Buying a home is the biggest purchase you’ll most likely ever make. If you’re thinking about buying a house in the new year, it’s a good idea to start planning now. Here are three things you can do now to get you ready to buy a home in 2023
Get your credit score in order
You may not have thought about it much yet, but your credit score is essential during the home-buying process. Your credit score will help determine how much you can afford, what kind of loan terms you can get, and even if you qualify for a mortgage at all.
So it’s important that you make sure your credit is in tip-top shape before you even start thinking about shopping for homes in the new year. If you don’t know where to start, here are some simple tips:
- Get a copy of your free credit report from all three bureaus. You can do this by using an online service like credit karma or Experian.
- Review each report thoroughly and look for any errors or inaccuracies that could be affecting your scores
- Dispute any errors with the bureau and ask them to remove them from your reports as soon as possible
Figure out what you can afford
Before you can even begin the process of buying a home, you need to understand what your monthly budget will look like. You’ll want to take stock of all the monthly bills that you have now, including things like student loans, credit cards, or a car payment. Once you’ve got that number, subtract it from your monthly income to see how much is left over for other expenses—like food!
If that amount seems too small for comfort, there are some steps you can take right now to improve it:
- Make sure all your credit card debt is paid off before year-end. Cutting back on interest expenses will free up cash flow immediately. Plus, paying off this debt early means that less money is spent on interest each month; instead, it goes toward reducing principal balances so they’re paid off faster than expected!
- Start saving—even if only $50 per month! This way when your dream house becomes available next springtime (or whenever), there won’t be anything holding you back from going ahead with purchasing the property immediately because all financial details were already worked out beforehand.
Set aside a down payment
A down payment is the portion of your home’s purchase price that you pay upfront, as opposed to financing the entire purchase price. For example, if you buy a house for $100,000 and put down 10%, or $10,000, then you will have to finance the remaining $90,000.
Typically speaking, lenders want 20% of your home’s purchase price as a down payment. This means if you buy a house for $100,000 then they may require you to put 20% down in order to qualify for an insured loan—that would be $20,000. However, this is not always the case! There are tons of programs out there that can help you buy your first home with less money down (sometimes even $0). It is important that you work with an agent and lender that are experienced with all different kinds of financial situations.
The process of buying a home can be a long one, and it’s important not to rush it. Take the time to get your finances in order, create an emergency fund for unexpected home repairs or other emergencies, and start saving for closing costs now so you don’t have to worry about them when it comes time to buy. You’ve got this!
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