Ready to purchase a home? Let’s talk finances

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Are you ready to purchase a home? Have you considered creative financing? Don’t worry — it’s not illegal! But there are some terrific personal finance hacks for homebuyers. 

Understand the Process

Before you can reach full home-buying-hack potential, you should understand the basic process. As Curbed explains, you should start by getting a handle on your budget. Tally up what you normally spend in a month, calculate your income, and decide how much can go toward a mortgage and homeownership. Remember to include things like utilities, insurance, and homeowner association fees. You also need enough in your bank account to cover the down payment and closing costs.

Once you have a general idea, it can help to play with a pre-qualification calculator. This will help determine what you can afford. Then, you should get pre-approval for your loan with a lender.  Pre-approval will be based on your ability to afford a home and will review documentation proving income, employment, and identity. The lender will also consider your credit history. Those pieces of information will help decide how much your loan will be and for what interest rate. You can then make a serious offer on a property.

Keep Finances Stable

One of the first things you should know about buying a home is to leave your bank account alone. HGTV points out that you should try to avoid any substantial expenditures within three to six months of your home loan application. Not only will it help you to have that cash handy for a down payment and closing costs, lenders like to see a reliable, stable financial situation. 

Credit Facelift

Another way to enhance the appearance of your finances is to improve your credit score. This may sound complex, but it’s actually pretty simple. Make sure you pay your bills in a timely fashion, pay down your debts, and keep credit card balances low. Also, don’t apply for credit unless you really need it. Opening unnecessary accounts generally won’t help you. 

Down Payment Information

The traditional down payment for a mortgage is 20 percent. However, you should research the market where you plan to buy and know the average down payment in your target area, as well as the percentage of homes that sell under their list price. It’s also incredibly important to determine how much house you can afford before diving in. Even if you can afford the down payment, you might not be able to afford the mortgage

Finding Assistance

If you don’t have the money sitting in your bank account for your home purchase, you still have some options. You can get down payment assistance, which typically comes through programs operated by state or local housing authorities; for example, Redfin explains that FHA loans, VA loans, and rural housing loans can help you purchase a home if you don’t have enough to put down. Depending on your situation, this can mean coughing up substantially less cash for your down payment, and for some home buyers, there may be no down payment at all. 

View the Home Differently

Instead of looking for your dream home, some experts recommend looking for a property that’s a good investment. Even if you don’t intend to “flip” a house, chances are you will move on at some point. Instead of looking for the house that most appeals to you, you can make the most of your purchase by buying a home that will be desirable when it comes time to sell. Look for areas that hold their value well (ask your Realtor). Also, don’t buy the biggest and nicest home in a neighborhood. You’re actually better off buying the worst home in the neighborhood, as it’s most apt to give you a good return on your money.

Legal and Smart

Thinking outside the box can help with financing a home purchase. Get a firm idea of your numbers, improve what you can, get help if you need to, and reframe your ideas for the right home to buy. Your financially savvy choices will help you become a happy homeowner!