Are you considering buying a house within the next few months or years? Becoming a homeowner is often a goal for many young professionals. In order to make sure you are ready to make the commitment, follow these three tips to get ready now.
1. Check your credit report
A higher credit score can save you thousands of dollars, since it can qualify you for a lower interest rate on the mortgage.
Major credit bureaus, such as Equifax, allow you to pull your credit report once per year, so you can check your credit report every few months if you rotate between the bureaus. It is critical that you repair any damage to your credit and remove any erroneous information from your credit reports before you start looking at mortgages.
2. Pay off debt
In addition to checking your credit report and score, you want to pay down other debt as much as possible. If you are serious about buying a house, you may need to reduce your entertainment spending for the next few months and use that cash to pay off debt.
It is important to make more than the just the minimum payments so that you can reduce the principal amount that you owe on the credit card or loan. Strive to pay off as much debt as possible so that you can save money by having a better interest rate on your future mortgage. You will also have less debt and less financial stress once you become a homeowner.
3. Start saving cash in the bank
In order to avoid becoming “house poor” you should strive to pay at least 20 per cent of the house’s purchase price as a down payment. This will save you money by eliminating the private mortgage insurance fee, and reducing the amount of interest you pay over the life of your mortgage.
Even if you do not have a lot of extra cash, start saving every spare penny you can because it will add up over the long run. Even an extra $100 per month could save you almost $10,0001 in interest over the life of your mortgage!
If you can start making small changes to your daily lifestyle so that you can pay off debt and save up cash, you will be better prepared for homeownership.
If you need a little extra advice, don’t forget that if you’re a Foresters member you have access to Everyday Money, our toll-free financial helpline that connects you to an accredited counselor who can help answer your questions about your personal financial matters such as debt management and budgeting.
Visit MyForesters.com for more information.
1. Assumes a 30 year mortgage with 20 years remaining, $120,000 at 4% interest.
415277 CAN (06/17)