Get Your Finances In Order With A Few Simple Steps

Get Your Finances In Order With A Few Simple StepsIf you are looking to buy a home one day but don’t think you are ready just yet, you are not alone. One of the most important tasks that you have to complete involves getting your finances in order.

There are a few ways to get your finances in order before you buy, no matter how long you have been waiting to buy a home. Getting your finances in order with these simple steps can help you become a more competitive applicant both for a mortgage and a home that is on the market.

Focus On Your Credit Score

While it is true that your credit doesn’t have to be perfect in order to get a home, a strong credit score will increase your chances of getting approved. In addition, a great credit score can also help you get a lower interest rate on your mortgage.

Some of the ways that you can improve your credit score include disputing errors that might be on your report, reducing your debt, producing a long track record of on-time payments, and avoiding late payments. All of this will help you get ready to apply for a mortgage.

Open A Bank Account For Homeownership

The cost of a home is far more than a down payment and mortgage bills. The reality is that owning a home comes with a variety of expenses for which you must be prepared. Therefore, it is a prudent idea to open a bank account that is solely for homeownership expenses. This account should contain a variety of funds including those for utilities, maintenance, landscaping costs, and even renovation expenses. This will help you visualize the amount of money that you have set aside.

Calculate The Budget

Finally, it is also smart to calculate a budget for the home. Some of the factors that are going to play a role in the sticker price of a home include the down payment, closing costs, and potential taxes. For help with this calculation, it is a smart idea to meet with a trained mortgage professional.

Prepare To Buy A Home

These are a few of the steps that you should follow to get your finances in order. These steps will make you a more competitive applicant for a mortgage.

The Importance of Paying Yourself First

Blue Piggy BankIf you are like most other average Americans you will have a list of bills that you have to pay every month, such as rent, cable, internet, cell phone, water, electricity and much more.

If you were to list each of these monthly expenses in order of importance, which would be number one?

The answer is none, because there is one payment you need to make which is even more important than all of these and that is to yourself.

The bill of “You” should be the first payment you make before you make any of your other payments. You can pay this bill by contributing a certain amount of your paycheck into your savings account.

Why is this so important?

It is extremely important because saving your money for the future should not be optional. If you are not consistently saving at least 10% of your income, you are actually living beyond your means.

If you do not pay yourself into your savings account, you will never be able to fund large purchases in life and will have to subject yourself to debt in order to buy what you need.

If an emergency such as losing your job or injuring yourself, you will have no emergency fund to take care of you and you will again be forced into debt.

When you are old enough to retire, you will have amassed no retirement nest egg to support yourself, unless you have been paying yourself first.

Check out a short video on the power of savings here 

Make it Foolproof and Automatic

Call your financial planner right now and ask them if they can set up an automatic direct deposit from your bank account to your savings or investment account.

Schedule it every month for the day that your paycheck comes in. If you earn $400 take home pay per week for example, 10% of this is $40, so you should set up the deposit to put $40 into your savings account every week.

Pretend that it is just another bill for a service that you have signed up for. After a while, you will adjust your spending habits and get used to not having it. Meanwhile, the money will be building up in your savings account and compounding interest.

Paying yourself first with a manageable percentage of your income is one of the easiest ways to grow your savings and prepare for the future.