How to Prepare for Your First Home Purchase | FaithFi
November 22, 2024
How to Prepare for Your First Home Purchase
Faith & Finance with Rob West
With mortgage rates fluctuating, now might not seem like the perfect time to buy a home, but it’s an ideal time to prepare, especially for first-time homebuyers.
Movement Mortgage recently shared helpful tips on FaithFi.com for those looking to enter the housing market. Here’s a breakdown of these critical steps to set you up for a successful and financially wise home purchase.
With mortgage rates fluctuating, now might not seem like the perfect time to buy a home, but it’s an ideal time to prepare, especially for first-time homebuyers.
Movement Mortgage recently shared helpful tips on FaithFi.com for those looking to enter the housing market. Here’s a breakdown of these critical steps to set you up for a successful and financially wise home purchase.
Step 1: Determine Your Budget—And Keep It Conservative
First things first, know what you can afford. It’s wise to set a sale price and monthly payment that’s less than the maximum a lender or loan calculator may suggest. Keeping a buffer in your budget allows for unexpected costs and helps you avoid financial strain. As Proverbs 21:20 says, “Precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it.”
Step 2: Set a Savings Goal for Your Down Payment
While a 20% down payment isn’t always required, it has some major benefits:
It gives you enough equity to sell if unforeseen circumstances arise
If you can’t reach 20%, aim to save as close as possible for these advantages.
Step 3: Budget for Additional Costs
Beyond the down payment, remember incidental costs, like:
Property and pest inspections
Moving expenses
Essential appliances (like a fridge or washer/dryer), if not provided by the seller
Planning for these helps avoid last-minute financial surprises.
Step 4: Check Your Credit
Most mortgage lenders prefer a credit score between 700 and 750, with 740+ often unlocking the best rates. Here’s how to optimize your score:
Review your credit report and dispute any errors
Pay down debts to keep balances below 30% of your available credit
Avoid any new credit inquiries, as “hard pulls” can impact your score
Step 5: Lower Your Debt-to-Income (DTI) Ratio
Even with a great credit score, high debt levels could result in a mortgage denial. Try to reduce any debt you can, like paying off a car loan, to improve your DTI ratio and increase your mortgage eligibility.
Step 6: Maintain a Clear Paper Trail
Lenders will closely scrutinize your transaction history, so avoid moving money between accounts for at least three months before applying. Any large transfers could complicate the process, as lenders must verify that your assets are not borrowed.
If you’re expecting a cash gift, consult a loan officer for guidance. Specific documentation may be needed to confirm that the money is a gift, not a loan.
Step 7: Pay Off Outstanding Tax Debts
If you owe back taxes and are on a payment plan, prioritize paying these off. Outstanding tax debts affect your DTI ratio and could lead to complications with lenders, as tax liens can take priority over other debts.
Step 8: Stay at Your Job
Lenders look for employment stability, so if you’re considering a job change, it’s best to hold off until after you buy the home. Having at least two years at your current job can reassure lenders and improve your chances of securing a mortgage.
Need More Help? Connect with Movement Mortgage
Movement Mortgage offers guidance for each step of the home-buying process, helping you make informed financial decisions. Additionally, they’re a faith-based company dedicated to philanthropic causes, having donated $377 million to educational and infrastructure projects in underserved communities.
Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.
