Eventually. That’s often the response folks give when asked whether or not they’d like to buy a home. It’s a safe answer because it sounds “responsible” (you don’t plan to rent forever, right?) but it completely absolves one of all immediate duty because there is no date. Unfortunately, this is the wrong approach. If you are the one purchasing a home, you need to be in an owner’s mindset as soon as you reach adulthood. Waiting until it’s “time” will leave you frustrated and disappointed because credit and savings are long term games— think marathons and not sprints.
Here are some ways to stay continuously mindful on your road to owning a home.
1 Creating a Real Savings Fund
Lenders want to see a history of you saving and paying bills. The longer the better. That means you can’t dump one tax refund check in the bank and think you’re good. Even if you have a great job and deposit a big ole bonus check in a savings account you may get flagged. Instead of planning on stashing cash once you get that golden egg, delegate one savings account as long-term and deposit something into it monthly or quarterly. It shows bankers you’re dependable.
2 Watch Your Credit Score
It doesn’t matter how much money you have in the bank—unless it’s a cash buy—you can’t get a good loan (with a competitive interest rate) with bad credit. Keep your eye on your credit report. Check it annually, and don’t just look at the score! Read it through to make sure everything is accurate and dispute anything that is false or outdated immediately. You won’t have months to get things corrected when you’re actively in the market.
3 Keep Your Debt Ratio Low
Car loans. Student debt. Credit card bills. These are all long-term debts that can negatively impact your ability to qualify for a mortgage. Be mindful of how much debt you’re carrying and the amount of time it will take you to actually pay it off. For example, if you have a five-year car loan, $10K in credit card debt and $30K in college bills, it may seem manageable to you but your monthly payments may make lenders assess you as having too much debt to carry another loan—even if it’s less than your rent.
4 No Co-Signing
It’s nice to want to help out loved ones, but you are responsible for anything you sign for. If you co-sign for someone’s car loan or mortgage, it will show as your debt when you’re ready to buy. The same thing goes for credit cards.
5 Learn About Ownership
Don’t wait until you’re ready to get into the market to learn about the benefits and challenges of investment properties, single family homes, co-ops and condos. Also, learn about your town or city’s real estate landscape and what factors you should take into consideration when purchasing. Is it a college town or a flood zone? Be an empowered buyer.