Preparing Your Finances for Purchasing a Home

If you are getting ready to purchase a home, you need this information about preparing your finances.

If you are getting ready to purchase a home, you need this information about preparing your finances.

No one wakes up one day and says, “I want to buy a home today” and does it. Purchasing a home for yourself, your family or for you and your spouse to spend retirement in requires lots of planning and preparation.  This ensures you get the financial details correct.

Spring is the beginning of the busy season for buying and selling homes. If you are going to be purchasing a home this spring or summer, now is the time to start preparing your finances to do so. Here is a breakdown of things to do before you begin the search for your new home.

  1. Expect and Prepare for Surprises. Fees and unknown costs will come up. Therefore, it is best to expect and be prepared for these surprises by creating space for them in your budget.
  2. Examine Your Credit Score. Take a free look at your credit score by visiting Be sure to fix any blemishes or errors on your credit report, as a higher credit score will help you get the best interest rate on your mortgage.
  3. No Big Purchases. Now is not the time to be making any large purchases. Keep your spending in check during this time, saving what you can and remaining constant on everything else. This will help provide a more consistent picture of your finances to lenders.
  4. Check the Numbers. Be prepared for number overload. They dictate everything from how large a mortgage you can afford to what you ultimately pay for your new home:
    • Down payment- the larger down payment you make, the less of the purchase price you have to finance. You can also avoid the additional payments that come with private mortgage insurance (PMI) by making a down payment of at least 20 percent.
    • Repair costs- is there anything that needs to be repaired in the home after you purchase it?
    • Fees and taxes- escrow costs, fees for multiple copies of your credit report and so on can add up. Try to get a good idea of what to expect as soon as you can.
    • Utilities- be sure to ask the current owners what they average per month in utility payments.
    • Moving Costs- renting a truck or hiring help is another cost many people forget about until it comes time to move.
    • Closing Costs- leave some wiggle room in your budget, as closing costs are often unknown until a few days or even hours before you close on your home.
  5. Materials and Documents. Purchasing a home requires a lot of documentation, enough that it may seem like you are drowning in paperwork at times:
    • W-2s for the last two years to gauge your income
    • A month of paystubs to further assess your income level
    • Investment statements to help the lender determine the diversity of your money and any other avenues to pay for your home
    • A list of all debts with balances, interest rates, monthly payments and terms if applicable
    • Multiple forms of ID, such as your drivers license, social security card and/or passport. Make copies of these as you will most likely have to provide them numerous times.
    • To be sure about all documentation, contact your loan advisor as they will have a better idea about all the paperwork you will need.

Thorough preparation is the only way to ensure the mortgage and home purchasing process goes as smooth as possible. If there’s one thing that can make life infinitely better than  a new home for you and your family, it’s doing so without any major headaches.

Get in touch with the mortgage lenders at Heartland Bank today if you are planning to purchase a home in the near future.

Heartland Bank, member FDIC and Equal Housing Lender