Going from a homeownership dream to a reality is a process that takes time, planning and money. No one but the very most fortunate among us wakes up one day and simply decides to buy a house – this happens over time.
At VIP Mortgage, our experts can help you with a long-term plan that begins well before you look into a specific mortgage loan. Here are some benchmarks to consider as much as five years out.
For many people, five years ahead of time is the starting place for a homeownership plan. Calculate your current income and any expected changes over the next few years, and look at a down payment savings goal you can start working toward. Earmark some portion of each paycheck for a savings account just for this purpose, and look for other ways you can contribute to this fund.
Lenders will know if your credit is bad, and it can often take at least a couple years – and generally more – for negative marks on your credit report to go away. At least four years in advance, look for ways to pay all your bills on time and reduce your debt to well below 30 percent credit utilization.
A lot can happen in these two years. If everything in your situation now appears the same as it was when you first began saving, you can simply stay the course. If any major events, such as a job change or move, have impacted your finances, this is the time to make these changes. Three years gives you plenty of time to adjust your planning without having to start over.
As you get closer to the actual planned time, it’s more important to narrow your focus and begin creating a list of wants and needs for your home. Begin looking at neighborhoods and shopping real estate agents. Get quotes from local movers, and consider changing your finances if your numbers here come out differently than you expected.
In the final year, it’s time to really ramp things up. Get all your documentation for a mortgage application, including tax returns and pay stubs. Choose a real estate agent, and begin shopping mortgage rates from lenders. Try to get preapproved for a mortgage as soon as you can, and make sure to factor in fees to your final pricing.
*The views and opinions expressed are my own and do not necessarily represent the official policy or position of Primary Residential Mortgage, Inc.