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For many people looking to buy a home, the financial part of the process is intimidating and confusing. Naturally, you’ve been reading up on home loans. There’s a lot of information to take in, but here are a few fundamental concepts to keep in mind when preparing your finances for buying a home:
Keep your finances stable
When looking for a home it’s smart to avoid making any major moves that alter your finances, such as buying a car or changing jobs. Banks appreciate a sense of stability in would-be homeowners.
Pay off debt
The amount of debt you have now affects your ability to take on additional debt of a home loan. Know your current debt level and work to lower it as much as possible between now and when you purchase a home.
Assess your credit score
For credit cards and other debt, be sure to make your payments on time to get good credit. Payment history is the most important factor in your credit score, accounting for about 35% of the total. Check with major credit bureaus to verify your score and fix any errors.
Know the loan types
The basic mortgage types are fixed-rate, adjustable-rate and hybrid. However, there are many types of loans available that suit a variety of financial situations. Ask about loan options that are right for you.
After you’re pre-approved for a home loan, you can narrow your search and target homes you can truly afford. Many home sellers select pre-approved buyers over those who are not pre-approved because they may feel more confident that the purchase will go through.
Your financial picture is a crucial part of the home purchase process. If you’d like to know more about home loans, please call or email any time.