Are you ready to buy a home? Whether you’re interested in homes for sale in La Quinta, equestrian ranches or a condo in a big city, there are a few things you should do to prepare your budget so you can start your search armed with your financial boundaries. Read on for three excellent tips for getting your financial house in order.
1. Clean up your credit. There are three major credit agencies that maintain records for everyone: Equifax, Experian and TransUnion. They will show all of your credit card balances, indicate if you are ever late on payments or if you have any defaults or judgments on your record. Negative information on your report will in turn lower your credit score, which will ultimately affect your interest rates and access to financing options. Obtain a regular credit monitoring service and get a credit report as soon as possible. Scour it for any errors and dispute anything that you can, as errors do happen. Try to pay down all your credit cards as much as possible as you prepare to buy a house.
2. Determine what you can afford. A great way to determine your budget is to get pre-approved by a lender. They will assess your income to debt ratio, as well as your credit, to figure out the type of loan you can afford. Experts say that your monthly payments should not exceed 26 percent of your gross income—you should also factor in the kind of debt you have as well.
3. Save for the down payment. Whether you’re looking at homes for sale in La Quinta or equestrian ranches in another part of the valley, you’re going to need to come up with a strong down payment. The basic rule of thumb is that lenders are looking for 20 percent of the purchase price as a down payment. While there are some agencies that will let you make a smaller down payment if you qualify, it’s really best to aim for 20 percent, so that your monthly payments are lower and you have greater equity from the get-go.
