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Getting your finances in order when you’re looking to purchase your first home

There are few things as rewarding as owning your first home. Financially, it’s the first step toward establishing true equity, which benefits you throughout life. On a practical level, you have a place that you can call your own, and the satisfaction that comes from that independence cannot be understated.

However, the process that goes into buying a house is often fraught with hardship and stress. Before jumping headfirst into buying a house, every potential homeowner should take a few steps to ensure their finances are in order. A comprehensive understanding of your own finances is one of the most basic real estate solutions that will save you frustration in the long run.

Before you even start looking at San Diego homes for sale, here are some financial steps that will alleviate the stress later on.

Assess your budget: First-time homeowners are unlikely accustomed to the sheer amount of financial responsibility that goes with obtaining a loan, so the more prepared, the better.

Document how much money you’re making vs. how much you’re spending on a monthly basis (spreadsheets are very useful in this situation). Establish a savings account, if you haven’t. Some financers offer incentives to first-time buyers looking at San Diego homes for sale—FHA loans, for example—but it’s rare that you will be able to obtain a loan without having any money to put down.

Clean up your credit report: Unfortunately, your credit report plays a major role in obtaining a loan, as it contains information from past lenders. It’s the financer’s obligation to determine whether you’re a favorable candidate based on your credit report. Before applying for a loan, take a look at what a lender sees by accessing your credit report, which can be done once a year at annualcreditreport.com. If there are any flubs or black marks, do your best to contact past lenders and have these corrected—it’s easier than it seems.

Get pre-qualified: Another real estate solution for first-time homeowners comes from loan pre-qualification. In many cases, your bank will act as your lender since they already have access to your financial records, but mortgage lenders offer benefits that banks don’t—availability during off-hours, for example.

Your lender will go-over your credit report (hopefully after you’ve cleaned it up) and determine how much of a loan you will be qualified for based on the information given. Just remember: the pre-qualification amount is not set in stone, but gives an idea of what you will be able to afford.

 

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