Getting Your Financial House in Order

Buying a home is perhaps the biggest investment you will ever make and getting your finances in order is particularly important as you begin this process. This is a very important first step to buying a home, whether you are making your first purchase of Portland real estate or a seasoned real estate investor.

The following is a to-do list that help guide you in the right direction:

•    Create a budget of your actual expenses for each month going back about six months. This will allow you to see where your money is going and account for all types of expenses like groceries, rent, utilities, and unexpected expenses, like car repairs or medical bills.
•    Reduce your debt, as this is a big factor that lenders will look at when reviewing your mortgage application. Lenders look for a debt load of less than 36 percent of your net monthly income, which includes a mortgage payment. Getting your monthly payments on installment debt (auto loans, student loans, credit cards) down to less than 10 percent of net monthly income is ideal.
•    Increase your income to help you qualify for a mortgage on the house you want. This may be done by seeking a raise, looking for higher paying job, or even taking a second job temporarily.
•    Job stability is important to most lenders. Staying at the same job for at least two years may help you get a better interest rate.
•    Save for a down payment, by opening a savings account and designating a portion of each paycheck to be saved. While some mortgage programs allow for as little as 3-5% down, you can get a much better interest rate by putting 20% down.
•    Improve your credit, by making all payments on time and paying off balances as quickly as possible. Using a couple of credit cards, that you pay off each month, can actually help establish a great credit history.

 

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