Buying your first home is one of the most exciting things a person can do. This is your chance to get in on an incredible market and invest in your future while buying a property you and your loved ones can live in: but it’s vital that your financial health is in line before you buy.
These are the most important things to keep in mind as a first-time home buyer and why it’s vital that you take them seriously.
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High and Steady Credit Score
One of the first steps to buying a house is for your lender to go over all three of your credit scores. There are many things that affect your credit scores, from making payments on time to ensuring you don’t spend too much of your credit limit or pay back too little at a time.
The minimum credit score to buy a home is around 650: but the higher your score is, the lower your interest rate may be. This means that you have to take the time to work to build up your score if you want to save thousands in the long run.
Few Large Changes Expected in the Next Five Years
How many large changes are you expecting in the next five to ten years? Although changes like having children, or switching careers, can be exciting: they’re also possibly large financial blows. Try to plan carefully, and think about how long you could afford to keep making house payments if you lost your job or how much money you could afford to put into these changes every month.
A Dependable Well-Paying Source of Income
How long have you worked at your job? Although it’s completely understandable if you had to switch careers, or companies, due to the massive lay-offs that happened in 2020: it’s a good idea to have a job for five to six years before trying to buy a home.
This is the perfect amount of time to ensure this is a company you trust and enjoy working for and to get a foothold in so they won’t fire you on a whim. This also shows lenders that you’re reliable and able to show up for work every day/
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Two Different Savings Accounts
Having money saved is an important step in buying a home. Unfortunately, many people only make one type of savings account and don’t realize the importance of having multiples. When you’re saving, you should have one account for emergency spending that never drops below two to three months of your income and then one account that’s saving with purpose. When you’re trying to buy a home, the account that’s saving with purpose should be for a home down payment.
Your Financial Health Matters When Buying a Home
Whether you’ve spent ten years building your credit score up from the 300s and you now have an awesome one in the 800s, or this is your first large credit purchase ever: it’s important to have your financial health in line before you try to buy a home. Think about whether you have each of these items, and take steps to close in on the ones you’re missing.
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