Smart Financial Tips for Buying Your Dream Home

Preparing finances for home ownership begins the day someone decides they actually want to buy a home. After all, saving for a down payment doesn’t just happen overnight! So, how do you best prepare your finances in advance to handle the most expensive purchase of your lifetime?

The following are five steps to take for home buying success, and they can be completed months or years before a first home purchase. To help you prepare your finances for home ownership, use this worksheet to track progress and keep all your to do’s straight.

How to Prepare to Buy a House: First Steps

Prepare Your Credit

It’s a given that good credit is needed to qualify for a mortgage, but preparing your credit also includes an important component of financially preparing for home ownership — debt payoff.

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Save for a Down Payment

If you opt for a conventional mortgage and want to avoid private mortgage insurance, which protects the lender in case you default, you’d typically put down 20% of the purchase price. It could take years to save the proper funds for a home down payment. That’s why many buyers choose to put down less than 20%, apply for first-time home-buyer programs, or pursue an FHA loan, with a possible down payment as low as 3.5% of the purchase price depending on their credit.

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Consider Closing Costs

Don’t get blindsided by closing costs. You’ll need to save for these, too. Typically, you can multiply the purchase price of the home by 3% to 5% to get a rough estimate of how much you’ll need to bring to closing. Even if the seller offers to pay some (or all) of the closing costs as part of the sale, having this money in the bank — just in case — will assure the lender you’re ready to take on the responsibility of a mortgage.

For the full article click the link below on How to Prepare to Buy a House.