Buying a home is a major life milestone. For first time home buyers seeking to stop paying high rent for a place they don’t own, It’s also one of the biggest investments they can make, and it’s important to take the correct financial steps to prepare. You’ll want to start planning at least a year before you even begin seriously looking for a home to buy.

One year before applying for a mortgage pre-approval

When applying for a mortgage, credit scores will dictate how much you can borrow. Pull a copy of your credit report, get a clear understanding of your credit score, debt to income ratio, total debt, etc. If your credit score is less than excellent, think about where you can make actionable and immediate improvements. Eliminate the errors if there are any, reduce your debt, and pay all your bills on time. Don’t cancel credit cards — you’ll need the available credit to work in your favor.

Don’t waste any time saving for a down payment. Give your personal budget a close look. Cut unnecessary expenses, make more frugal choices, and either sock away the cash for a down payment or pay off debt. Do you have any opportunities to bring in some extra money? Consider a temporary side job whose paycheck can be dedicated to your house fund. Take advantage of the chance to work overtime if your employer allows it. Have a yard sale to get rid of things you no longer want or need. Try to get some money through consignment or private sale for the stuff worth a little more.

Six months before

Don’t make any major purchases. Unless it’s an emergency, hold off on any major purchases such as a new car loan, new credit card or line of credit at this stage.

Four months before

Bring in as much cash as you can over the next eight weeks. When you apply for a mortgage, lenders will typically want to see your bank statements from the most recent two months. For the most accurate picture of your updated credit score, pull a new copy of your credit report from at least one of the three major credit bureaus directly.

Now you’re ready to apply get pre-approved for a mortgage, find a real estate agent, and do some serious house hunting! Or maybe new construction is what you’re looking for. We have communities across southern New Hampshire. Call us for a tour!