7 Simple Tips To Set You Up For Home Buying Success
Is 2018 your year to buy a home? If you’ve made the decision to purchase a house this year, your work is just getting started. Homeownership is likely the biggest investment you’ll make in your life. It’s a huge commitment – and a costly one, too. But don’t let that scare you.
Reduce your stress and start by getting your finances in order with these seven simple tips to help you get organized and save up the funds needed to purchase the home of your dreams.
Know how much you plan to spend. If you’re planning to buy a house this year, you’ve probably been shopping around and have a ballpark idea what a home that fits your wants and needs will cost. If you haven’t already, getting prequalified can give you an idea how much house you can afford – just remember, before you make an offer, you’ll need to be preapproved, not just prequalified.
Set a savings goal and start working towards it. Once you know how much you can afford, decide how much you need to save for a down payment. While there are home loans that allow you to purchase a home with less than 20 percent down, it’s a good idea to aim for a 20 percent down payment, if possible. Anything less than that and you’ll end up paying for PMI (private mortgage insurance) as well. Determine how much you need to save and break it down month-by-month to give yourself a specific goal to save for.
Create a savings account for your housing funds. Opening a separate savings account can help you stay organized and keep you on track with your goal. If you keep your down payment money saved in your checking account, not only can it be difficult to keep track of how much you’ve saved, you’re also more likely to spend it. Check with your bank to find out about options for opening multiple accounts to designate for specific goals.
Shop around for the bank or credit union that offers the highest interest rate on savings accounts. Consider an online bank, as they tend to offer higher interest rates. Steer clear of any accounts that come with a monthly or annual fee. There are plenty of no-fee options available.
Set up an automatic transfer. The concept of “paying yourself first” can really help your savings add up quickly. Set up a regular, automatic transfer from your checking account to your savings account for a specific day (or days) each month. If you have direct deposit at work, talk to your employer’s payroll department to see about depositing a portion of your paycheck into your savings account every payday. Or, simply set up an automatic transfer through your bank to move a designated amount into your savings account on payday. Automatic transfers allow you to keep saving without even thinking about it and can help you stay on track with your savings goal, even if you forget about it.
Save cash windfalls, don’t spend them. Getting a bonus or a big tax return this year? One-time infusions of cash, including small amounts of cash gifts, commission checks or profit from selling any personal assets or possessions can accelerate your savings, and if you’re living on a budget, you won’t need it anyway, so put all that extra cash straight into savings.
Set a budget and cut your spending. If you’re serious about buying a house in 2018, it’s time to review your budget and trim the fat. Where can you cut costs each month? Reduce how much you spend on movies and entertainment, dining out, traveling and other discretionary spending. Put any non-essential purchases on hold until you’ve reached your savings goal. If you don’t need it, you can live without it (at least until funds for your down payment are stored up in savings).
Avoid making any large transfers before applying for a mortgage. Your lender will scrutinize all your financial activity over the last several months. Any large transfers into your bank account could raise a red flag, and you’ll likely need to provide explanation and documentation for each. Deposit cash into your savings account in small increments to help avoid any questions. Be sure to ask your lender what funds they’ll approve and if there’s any cash you won’t be able to use for a down payment (such as a cash gift from family or friends toward your home purchase). Be sure to get all the details on necessary documentation for cash gifts so you won’t be denied by your lender.
If you’re considering purchasing a home in 2018, now’s the time to talk with a mortgage lender to get an idea of the size of loan you’d qualify for and just how much cash you’d need to have to put down at closing. Contact PrimeLending today to speak with a home lending expert in your area. Our experienced lending professionals can help answer your questions and get the prequalification process started.
All loans subject to credit approval. Rates and fees subject to change. Mortgage financing provided by PrimeLending, a PlainsCapital Company an Equal Housing Lender. ©2018 PrimeLending, a PlainsCapital Company (NMLS: 13649).