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First Home Purchase? Prepare Yourself Financially

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Buying a home is a big life change and is likely to be one of the biggest purchases that you make in your entire life. Even if you feel like you can easily afford a down payment as well as monthly mortgage payments, there are some important things that you need to take into consideration before moving forward.

Learn Borrowing Potential

One of the biggest things that you can do to prepare to buy a home is to find out your borrowing potential. It is important to check with several financial institutions to be sure that you are going to be able to borrow the amount you need with the lowest rates of interest. Checking with different institutions may leave you surprised at the fact that you may be able to borrow a much different amount than what you first thought.

Saving

Save your money before you buy a home. While saving is a great way to get the money you need for a down payment, you should generally save around double of what you are using for a down payment. This will ensure that you have money in the event that you are unable to pay the monthly mortgage, you have circumstances that require you to spend money on repairs, or if any other emergency surfaces.

Budgeting

Learn to budget wisely before you begin having to budget in a monthly mortgage payment. You should always have a good idea of what is coming into your banking account and what is being taken out. Take advantage of free online budgeting tools to help you. This will ensure that you can fit your mortgage payment into your spending habits and will also give you a solid idea of what you can even afford. When budgeting, be sure to think realistically about what you spend on needs and what you spend on extras.

Understand Your Credit

A home is one of the biggest purchases that you make, and likewise, it is one of the biggest debts you will have. Be sure that you are prepared for this debt by getting a better understanding for how debt works. It is also a good idea to eliminate as much debt as possible before you purchase a home. Things like student loans and unnecessary lines of credit should be maintained as much as possible before purchasing a home. Talking to a financial adviser can help you better understand debt and can help you map out a plan for paying off debts before you make the decision to purchase your first home.