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How to Get Your Finances in Order Before Buying a Home

House mortgage financial concept

Here’s a checklist that will help you make sure that you’ll have no trouble paying for the home of your dreams:

Gather your financial records

Before you take any other step forward in your home-buying journey, get all your paperwork ready. In addition to your personal identification, have the following financial documents ready:

  • W-2 (wage and tax statement) forms from the last two years
  • Federal and state tax returns from the last two years
  • Your two most recent pay stubs, preferably showing your year-to-date income
  • Bank statements from the last two to three months
  • Asset account statements, indicating any stocks, bonds, mutual funds, and retirement accounts that you own

Submit only copies of these files unless otherwise specified and keep the original files for future use.

Check and improve your credit score

As early as six to 12 months before you shop for a home, order a free credit report to see if your credit score needs some boosting. Checking your annual credit report early also gives you the opportunity to request corrections if you find any anomalies or discrepancies in your records.

When it comes to assessing your credit-worthiness, lenders generally use the following ratings:

  • Excellent:  750 or higher
  • Good:  700-749
  • Fair:  650-699
  • Poor:  600-649
  • Bad:  Below 600

By checking your credit report early, you can work on improvements with ample time. Here are some things you can do to earn a better credit score:

  • Pay off outstanding credit card debt
  • Pay off other outstanding debts
  • Pay regular bills on time
  • Leave old, settled debt on your record as proof of your ability to comply with financial obligations
  • Don’t buy big ticket items

Get a mortgage pre-approval

One more step to take before actually shopping for options is to get a mortgage pre-approval. Through this process, a lender will review your records to assess the actual amount that you can borrow and at what particular loan terms.

Pre-approval is important because it informs you of how much you can afford to spend on your home purchase. As an official letter from an authorized letter, it can also serve as proof of your capacity to pay – a useful bargaining chip if you’re wooing the seller of a highly coveted property.

Put together a down payment

Preparing your finances well ahead of actually searching and choosing a home will also benefit you when it comes to saving up for a down payment.

The standard down payment is at least 20% of the total list price for a home down payment. If you are able to pay a larger sum up front, you have less to pay off, spend less on interest over time, and earn more equity for the property off the bat.

Prepare for closing costs

In addition to saving for your down payment, be sure to have enough money for the miscellaneous fees associated with closing your home purchase. These include loan origination fees, payments for inspection and appraisal services, title search and title insurance fees, and taxes. You should also factor in how much it will cost you to move from your previous home to the new one.

Find only the best homes for sale in Moore, OK with Midtown Realty, LLC. Call us today at 405-600-7276 or send your inquiries to info(at)midtownrealtyokc(dotted)com.

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