How to position yourself to be mortgage qualified
Recent college graduates start to plan their 10-year goals pretty quickly after graduation. It’s easy to put “buy a house” on the list and then forget about it.
Instead of forgetting about what you put on your list, or thinking that those goals will simply achieve themselves one day, it’s important to start making small steps toward those goals in order for them to actually be a reality one day.
So, you want to buy a house one day? Great! How can you position yourself wisely right now so that dream can happen? What actions should you be taking every single day, week, month or year?
eHome America wants our clients to be fully ready when they start thinking about purchasing a home, and most of that preparation happens before they ever become one of our clients.
If you are a recent college graduate or someone who has never purchased a home but would like to in the future, listen up! These are some great tips to take with you as you journey on through life.
1. Pay off debt--NOW
If you have any debt, it would be wise to start paying that off immediately. We know student debt looks like a big mountain that is never ending, but just start making payments toward it and overtime it won’t seem so intimidating.
You will want to have as much cash in your pocket when it comes time for you to purchase a home. The more payments you have, the less you’ll be able to afford the quality of home that you really want.
This also allows you to devote a larger amount towards your down payment. It’s helpful to save this big chunk of money overtime versus trying to come up with the money all at once or within a short period of time.
2. Work on your credit score
Even if you aren’t planning on buying a home any time soon, building your credit takes substantial time. If you are younger and have not built up a healthy credit score, now is a fantastic opportunity for you to take advantage of time!
Use this time to take out small amounts of credit and paying back the balance immediately, to increase your credit without getting into debt.
A good tip for this is to set up your monthly recurring bills on a credit card which you already budget for, then paying off the amount put on your credit card. This is an easy way to leverage the benefits of a credit card and your monthly responsibilities. It’s basically a win-win.
If you do this, make sure to avoid the trap of feeling like you have extra money on hand. You don’t! That money still belongs to those bills. Practice discipline and pay off your balance no matter what!
3. Open a compound interest savings account
Since you have time on your side, why not open a savings account meant to benefit you over time!?
There are certain savings accounts that are built to increase your money overtime when you leave that money alone. Open these accounts with the sole purpose of not touching it.
You can set up an auto draft from your paychecks to go directly into your separate savings account which you don’t typically look at.
Over the course of a few years you will have built up some substantial savings while reaping the benefits of compound interest. Depending on what your goals are for a down payment or other housing expense, you can determine when will be the right time for you to use that money.
4. Don’t rush
Purchasing a home should be considered a large investment. Rushing into big purchases usually leads to mistakes and regrets. We want you to avoid both of those things.
Remaining patient in the preparation years will help you to be in the right place financially at the right time. Rushing the process never helps!
Interested in becoming fully prepared? Take a look at our Homebuyer Education Course!