Thursday, August 4, 2016

Purchasing a Home: Financial Preparation Planning

According to Gallup’s annual Economy and Personal Finance survey, 56 percent of Americans own a home and 25 percent plan to purchase one in the next 10 years. Experts say you should begin planning to buy your home a year before actually making the purchase. Having a game plan set up ahead of time may save you tons of extra time and money. Here's how you can prepare your credit and finances for your future home investment:

Start with Your Credit Score

accounting-761599_640.jpgStart with knowing where you stand and how lenders will look at you financially. Credit reports will show lenders whether you are routinely late with payments and whether you have run into serious credit problems in the past. Doing this first will give you time to work on building your credit score if necessary. Make sure you use an actual FICO score, as this is what most lenders see. Credit reports are kept by the three major agencies; Experian, Equifax, and the TransUnion. You can get a free copy of your credit reports annually from

Convert to a Conservative Budget

Downsize your current living expenses to put towards your new home purchase. Determine your budget with the amount you can afford to repay now in mind, not the maximum you're allowed to borrow. Keep in mind that life changes may come and careers might change down the road. Children, cars, and travel plans are just a few additional costs that can cut into savings, so make sure you have room for these costs in your budget.

Crush Your Debt

It breaks down to this: when you owe less money, you have more disposable income. As you begin to think about shopping for a house, think about other potential debts you have accumulated. Take the added income you have from budgeting and put it toward paying off your debt. Once you owe less on other debts, you’ll have more money to put toward your home (not to mention the boost you’ll see in your credit score). Another piece of advice while you’re getting ready for a mortgage is staying away from new debts, such as car loans or anything larger than $10,000.

Getting prepared to take out a mortgage may seem like a lot of work, but early preparation makes the entire process run much more smoothly. The American dream of owning your own home can turn into a nightmare quick if you aren’t prepared.

At St. Cloud Federal Credit Union, we can help you get that dream house and a real estate investment. Contact us today to talk with our mortgage department and find an approach that works with your lifestyle.

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