As many of you already know, my wife and I will be moving in a few months. As I’ve already shared before, we’ve already eliminated the option of buying a home. It would be a stretch for us to buy a home this early – it’s possible, but it would be way too risky for me. But, that doesn’t mean that we’re doing nothing.
It’s exactly the opposite. We’re being really active in preparation for our future home – mainly because it means that much to us. “We” are also really preparing for our home purchase because I like to be well prepared. If you are looking to buy a home in the next couple of years, here’s a few things that you can do to prepare yourself for a mortgage.
Step 1 – Evaluate your Spending and Cut Back
My wife and I just announced our ten steps to save more money to help us afford our lifestyle changes and also continue to save for our down payment. The simple truth is that if you are thinking of buying a home anytime soon, you need to start working on your plan to get yourself from no savings to a down payment. It’s not easy to build up a down payment when you make less (as a young adult), but it’s not impossible. It takes hard work, but I’m excited to save the money for our first home.
Step 2 – Make Sure You Can Afford It
Saving up enough money for a down payment isn’t the only sign that you can afford to buy a home. You also have to have enough extra cash in an emergency fund, enough income to cover the mortgage, insurance, and taxes, and that’s only the beginning. Make sure to include the regular maintenance, repairs, and other minor expenses. Also make sure that you are not being too confident on the security of your income, and it’s always a better option to buy a home based on one income.
Step 3 – Estimate Your Mortgage Payment and Get Preapproved
Another part of the preparation for buying a home is getting an idea of what you will be approved for. You have to be careful because approval for home loans because approval means that someone is doing a hard inquiry on your credit. It’s okay to do occasionally, but too many inquiries can actually hurt your credit, which in turn increases your interest rate and how much you will pay for your mortgage. With that warning aside, I am a huge fan of getting a pre-approval well in advance so that you can get an idea of what you will be approved for and how much it is going to cost to buy a home. When you get closer to buying a home, you can start to shop around to find the best rate and mortgage in general, but it starts with having a long-term goal.
Buying a home can be a really exciting thing – or so it seems from where I am sitting. But, it doesn’t mean that it’s all fun and games. It takes lots of preparation and hard work to do it without making a major mistake. Luckily, if you are a few years away from buying a home, you have enough time to prepare.