Before You Get the Keys: Preparing Your Finances to Afford a Mortgage

Tue, Nov 26, 2013

Budgeting, Financial Advice

Millions of people dream about getting the keys to their first home, but relatively few in comparison are able to turn those dreams into a reality. A primary cause for these deferred, postponed and even rejected dreams is because of not having a sufficient financial structure. Keep in mind that before your future home’s foundation can be built, your financial foundation should have already been established, and currently be in great condition. There are several steps that can be taken now to be fully prepared to close the deal on your first home later.

Check Your Credit Right Now

Before you do anything else, you need to get your free credit report score. Less than 40 percent of American adults have obtained at least one credit report, according to a study conducted by Experian. Even though there are many competitively priced deals on bundled credit reports and scores, you are entitled to receive one free report from each bureau annually. Do not pay attention to your three-digit credit score exclusively. This figure will only represent the tip of the iceberg of your financial credibility. You need to take the time to study both the positive and negative information that is provided within your actual credit report in order to identify and isolate your financial strengths and weaknesses accordingly. Doing so will allow you to move in the right direction towards achieving your goal of owning your first home.

Stick to a Strict Budget

There are not very many people that enjoy creating a budget, and even fewer who enjoy actually sticking to one. However, this is an important step that needs to be taken into consideration if you truly want to be successful in your endeavors. Since you will already be checking your free credit report score at least once a year, you will have a clear perspective as to which bills, expenses and debts should be factored into your budget, which will keep you focused and help minimize the risk of mishandling your money. Do not fall into the trap of making too many exceptions when it comes to limitations and restrictions on spending because it only takes a few of these loopholes to completely nullify your entire budget.

Save, Save and Save Even More

Whether you want to buy your first home within the next year or the next decade, you should have already started saving your money. Doing so, in addition to regularly checking your free credit report score, will allow you to make sure that you are prepared to purchase your home and, more importantly, to deal with other types of financial storms that may come your way. Regardless of your social or financial status right now, studies have confirmed that these storms can detrimentally affect any household. This fact was made clear after the financial crisis of 2008, and the resulting economic recession. Even if you can only afford to save an insubstantial percentage of your paychecks regularly, you can eventually build an emergency fund that will definitely come in handy; both now as well as after you have purchased your first home.

The Biggest Roadblock

When it comes to finally being able to turn your dream of receiving the keys to your new home into a reality, there is one major roadblock that can cause you to crash and burn. The finger of blame can be pointed in many different directions, but it should only be pointed directly at you in this regard. Make sure that you stop being a part of the financial problem, and become a major part of the solution instead.

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