Most homebuyers think that buying a house is an overnight process but it’s not. The prep time will lead to successful homeownership. When considering buying a home, a potential homebuyer should prep for the process which will lead them to to successful homeownership. I understand that we live in an instant gratification world but slowly moving thru the process has huge advantages in the long run.
The first thing you need to do in prepping for successful homeownership is to understand credit and more importantly your credit. For many it’s a scary process facing your reality of how you’ve managed your finances but in the long run it gives you the best advantages for homebuying. When addressing your credit it’s best to first pull your credit report on your own and review what’s on there. You can do this by getting your FREE annual credit report individually for all three credit agencies. Your credit score will not be on there but that’s not what is really important. What you are looking for on your credit report are discrepancies, incorrect information and the different types of credit you’ve acquired in the life of that credit report. The life of a credit report typically displays the last 7 years and at times up to 10 years of your financial history. During that time it will display:
- How you have paid your creditors
- How much your creditors have lent you
- What type of credit you have with them
- How long you have been in the relationship
The four factors all play a key role in what amounts to your credit score. While the credit agencies will not reveal clearly how they calculate credit scores these four variables are the path to lenders deciding on your credit worthiness and your insurance company giving you a good premium.
- Type of credit – matters a student loan verses a credit card hold different weight to your score and to the lender.
- Length of relationship – how long you have had the credit card matters verses how long it took you to pay off the car note. Long-term credit cards are always better than several closed accounts so pick 2 or 3 credit cards you plan on having a long union with.
- Amount of credit – Before getting the credit card understand maximum limit they might issue on that card. Yes you should have at least 2 to 3 credit cards but having at least 1 or 2 with a high limit is necessary and make you look good to creditors. You probably will not get the maximum amount first time around but use it as a goal to acquire that max limit even if you think you’ll never need it! But surprise homeownership always leads to your needing a large line of credit at a good interest rate one day.
- Payment history – on time payments are the best, late payments isn’t and delinquent payment is the death of you.
You also want to learn what your preferred banks credit benchmarks are for getting the best rate possible. Do this by having a candid talk with their mortgage representative explaining what you are looking to do before you come to them officially. Failing to understand your credit and your credit report can potentially cost you to have higher interest rate. It costs money to borrow money and a lower interest rate can save you thousands.
Depending on where you are with managing your finances these recommendations may take no time to accomplish or a few years. Either way the journey to get to homeownership is worth it. Just remember not to rush it, buy a home that truly makes sense for your life and not your want to be lifestyle. Successful homeownership isn’t in buying the house but learning how to acquire it and keep it financially stress free while taking care of it and yourself. It’s a process that never ends since refinancing, renovations and repairs will be in your future once you own the home.
The Secrets to Successful Homeownership
- It’s not about the FICO score it’s about the details that make up the credit score you want to achieve a good balance.
- Have access to a credit card with a high limit, great interest rate and whatever perk you can get like cash back which I think is priceless.
- Buy the house you can truly manage financially and in upkeep, most people buy a house they cant.
- Understanding what makes up your credit score allows you to make good decision in your daily financial decisions.
- Having good credit affect your homeowners insurance not to mention your car etc.
- Buying a home is a journey not a destination. The journey continues financially and in upkeep of the property, after all you’ll sell it one day.
- Working with a educated Real Estate Salesperson is key to this process you want to form a team who will help you get the right home. Let’s talk if you seek a home in the New York City area.