Every House Has a Story: Buying a house starts with your finances.

Buying a house starts with your finances.

The first step in buying a house really begins way before you hit the streets looking. It starts with your finances. If you are looking to buy a house it is never too early to start thinking about it. The things you do today will affect how things will go with the home buying process.

Mary Beth Henderson of Embrace Home Loans suggests getting your financial house in order before getting that home loan.

1. Pay all your bills on time. This tip is a no brainer for most but you need to be diligent as you move into the process of buying a home.

2. Start a separate account for your house fund. It’s important to separate the funds from your normal checking account. If you label it your house fund you are more likely to save the money. One possible idea to boast the savings…Do you use coupons at the grocery store or a store rewards card? Chances are you saved money when you went to the store. The amount is normally printed at the bottom of the receipt. Take the money you just saved and put it in the house fund. You will be surprised how fast that will add up.

3. Avoid opening new lines of credit. The amount of money you can get a loan for depends on your debt to income ratio. If you have too many lines of credits (credit cards, car loans or other loans) the amount the bank or lender can give you will be lower. So think twice before you sign up for that great credit card offer or buy a car.

4. Before you set off looking for that perfect home, sit down with a mortgage lender to get prequalified. This will let you know exactly how much you are able to spend. Your lender should also be able to tell you an estimate of what your monthly payment would be at that level as well as how much you will need for closing costs.

Remember just because you got prequalified does not mean you can go out and get credit cards or a new car. “Opening new lines of credit can both lower your credit score and raise your debt to income ratio making it no longer possible to qualify for a home.” Mary Beth goes on to say “ Underwriters like to see “rainy day” money in borrowers accounts, in particular first time buyers. Not only should you try to save your down payment, but also a couple months extra in savings in case of an unforeseen event that might challenge your ability to pay your bills.”