Buying a house isn't as easy as choosing one that you like and going through the legal and financial process. If you want to be well prepared for the world of homeownership, then you want to take several steps months before you want to buy.
Know Your Budget
Lenders are generally willing to give you a mortgage that's in excess of what you can realistically pay. A good rule of thumb is that your mortgage, home insurance and related housing expenses should not be more than 25 percent of your take home income. While you can often bump it up to about 30 percent without noticing, any closer to 50 percent of your total income can set you up for a financial disaster.
Save for a Down Payment
To avoid paying extra insurance, it's best to buy with at least 20 percent down. Start your savings account at a not-local-to-you bank and then set up an online payment from your primary bank to the savings account. You can automate the transfer to happen every pay period and it will be hard to withdraw from mindlessly when you want a pair of concert tickets.
Improve Your Credit
Unless you're paying cash or going through a mortgage lender who uses transitional underwriting, having the highest possible credit score is important in order to get the best interest rate. Don't get ripped off by a scammer who will promise to boost your credit in 30 days; such claims are generally not true. You can do a few things that can help boost your credit score, such as getting mistakes removed and making payments on all of your bills. Long term approaches include paying off debt so that your debt to credit ratio is lower and paying off collections (which stay on your report for seven years) so that their time starts going down.
Budget for Extra Expenses
Moving comes with more expenses than just the trucks and boxes. You may view this as a chance to deep clean, so renting a dumpster might be in order. You'll likely be so busy with packing and house-related paperwork that you don't have time to cook or clean, so extra money needs to be devoted to take out meals and hiring a housekeeper.
Find a Home Insurance Policy
Not all home insurance policies cover all areas or all of your particular needs. You'll need to decide what kind of coverage you need, such as whether or not you are in a high risk area for flooding or earthquakes, and then make a list of the criteria you need so that you can shop for a suitable policy easily.