Checking Your Financial Health Before Buying A House
Thinking of taking the plunge into homebuying? Whether it’s for the first time or you’re ready to transition to a new house, it’s important to review your financial health. If you jump in without taking the proper considerations, you run the risk of making a hasty decision that compromises your long-term goals, budget, or overall financial wellbeing.
Buying a home is a big decision, but we’ve gathered some tips to help you determine when to buy a house, financial items you need to consider, and more.
Important Questions to Ask Yourself Before Homebuying
Purchasing a house means spending a lot of money and signing your name on many legally binding documents. Before you do all of that, you owe it to yourself to ask several important questions:
- How much house space can I afford?
- Am I willing to take out a loan?
- What’s the most I can drop on a down payment?
- Is my preferred neighborhood affordable with good home values?
- How close is the house to work, school, the gym, etc.
The above questions should act as your baseline for determining if it’s the right time (and the right house) for becoming a homeowner. Take the guesswork out of determining your answers with the help of Landmark’s Quick Rate Quote calculator. Once you have solid answers to each of these, you can proceed to the first step of the home buying process.
Review Your Check Credit Score
As far as your financial health is concerned, your credit score is the first thing to consider when buying a house. If you decide to apply for a loan, your lender will run a check on your credit score. Before this happens, review your own credit report to make sure there won’t be any kickback during the loan process. If you find any errors during your review, dispute or settle them immediately, or your homebuying process may end before it starts.
Figure Out When You Want to Buy
There are pros and cons to looking for new homes at different times of the year. Due to better weather conditions and a larger variety of homes to choose from, spring and summer are the most popular times to buy or sell a house.
However, if you’re on a budget, there’s a sweet spot at the end of autumn and early winter where the prices typically drop in response to a less active market. Hectic holiday schedules and cold climates make moving unappealing to many people, but less competition means you may have better chances of finding an affordable home.
Unless you intend to buy your home outright with cash, you’ll need to get a loan from a bank. That’s why receiving pre-qualified before buying a home is critical. By being pre-qualified for a mortgage, you can streamline the financing process for a new home and make an offer to the seller sooner. If you wait to get qualified for a mortgage, you may miss your chance to bid on a property before it’s snatched up.
While the previously mentioned credit check is a part of receiving pre-qualification, there are many more financial aspects a lender needs to consider. Common financial items you’ll need to provide for pre-qualification include:
You’ll need to prove you earn enough income to make your monthly payments in the form of income statements, like W2s, 1099s, rental income, tax returns, etc. Existing assets, like bank statements and retirement accounts, can also help.
Any debt you currently owe can impact your ability to make monthly payments, which is why your lender needs to know about it. This includes monthly expenses like student loans, credit cards, and other mortgages.
Your Financial Record
You’ll also need to provide records of bankruptcies and foreclosures. A lender will find these during their background checks, so it’s best to be open about any issues in your record. By addressing them as soon as possible, you can better anticipate any complications they may create for your loan qualification.
Your Current Expenses
It’s important to take into account your current rent, child support payments, alimony payments, and any down payment gifts. Once you have pre-qualification, you can begin your home search in earnest, confident that, assuming no dramatic change occurs, you are capable of paying back the loan on any house within your pre-qualified price range.
Explore Home Loans with Landmark National Bank
While a financial health check may take time and effort, carefully measuring your income, expenses, and other factors can help you better determine if you’re ready to commit to a new home. In the event that you’re ready to buy a home, explore your home loan options with Landmark National Bank.
From conventional loans to USDA loans, we offer a wide range of programs for prospective homebuyers. Find a Landmark National Bank branch location near you and discover the home loan that’s right for you today!