"Buying a home is a significant step into adulthood, a dream of homeownership and having a place of our own—an investment that can be passed down through generations. However, another major aspect of adulthood is debt. We start out with debt before we even become full adults. We often accumulate debt, from credit cards and store credit cards to car loans and student loans, sometimes even payday loans. This can pose a challenge for those seeking pre-approval for a home loan or aiming to avoid being 'house poor.'
The grand majority of people that I encounter go for their pre-approval when they have too much debt in their credit score history which then limits them on the pre-approval amount, their savings, their monthly mortgage as well as the interest rate that they will receive on their loan. Making the homebuying process more stressful than it should be.
Keep in mind that debt is not all bad, responsible use of credit cards can positively impact your credit score. This will give the confidence to investors and banks to lend you money because you are seen as less of a risk.
Once your credit score has been established, once you have your debt under control, and you have gained enough savings: that is the time when you go for your pre-approval.
Saving 20% may seem unrealistic to some, but it's crucial to understand that if you can't save for your down payment and closing costs, you may not be ready to buy a home. A home comes with more than just a mortgage. The mortgage does help you with being on top of your real estate taxes and insurance premiums, however, every home needs maintenance as well as an emergency fund. You need to understand how to control your debt, how to budget, and how to save before becoming a homeowner.
While insurance can cover a lot, it doesn't cover everything. Normal wear and tear, like a 50-year-old roof starting to leak, isn't usually covered. You'll need savings to handle such home maintenance.
I tell you this so that you can take the journey to get prepared before buying your house. Learn how to pay off your debt, use credit cards to your advantage, save efficiently, repair/build credit score, and learn how to hire the correct people for your needs. I see many homeowners fail because they don’t have enough money to maintain their home, or deal with pest control. Many do not have an emergency fund and are house-poor. Do not be that person.Prepare your mind, body, and soul before embarking on the homebuying journey. Believe in yourself, stay determined, and remember: You've got this!
Follow my blog so that you can get tips on how to accomplish everything above. Below are some tips:
See ya next time!
Comments