Do You Need To Clean Up Your Finances Before Buying A Home?
Managing money isn’t always easy. An unexpected expense can come out of the blue and hit you hard. From there, it can be a slippery slope to the road back to recovery.
If you’re not the best at managing your money, you’re not alone, almost 80% of Americans living paycheck to paycheck.
In order to buy your first Knoxville home, you’ll want to make sure that your finances are in order. In this post, we’ll cover some common money mistakes that prevent buyers from buying their first home and what to do to improve those habits.
Living Paycheck To Paycheck
When you’re living paycheck to paycheck, it can be hard to save up the money to buy your first home. Before you’re ready to buy your first home, you need to clean up your finances so that you’re putting money away every month.
Pairing down your monthly expenses is the best way to stop living paycheck to paycheck. Take a look at your monthly expenses. Do you have anything you can afford to cut? Cutting expenses isn’t always easy, but they can add up on a monthly budget. You may have a habit of eating out every weekend or being paying for a cable plan that you barely use. If it’s a frivolous expense, consider cutting it. These little cuts can add up.
Being mindful of your monthly expenses can help you be more proactive in your spending. When you know that spending $100 on meals out every weekend can quickly add up to $400 a month, you may reconsider how you spend your money every month.
Being Clueless On Credit
A credit score is a reflection of your ability to use and repay credit responsibly. When you think about buying a house, your credit score will be very important. Those who are frivolous with their finances often don’t know if their credit score is an 800 or a 500.
Before you think about buying a home, be sure to check in on your credit score. You’re allowed to get a free copy of your credit report once every 12 months. There are also many credit cards, like Discover or Capital One, that allow you to see the changes in your credit score once a month.
So why does it matter to keep tabs on your credit score before you consider buying a home? There are many times where a credit report has errors. If there are errors on your report or you need to work in improving your credit, it can take some time.
Living On A Mountain Of Debt
The thing about debt is that it adds up quickly. With the swipe of a card, debt and monthly interest can go from a little bit of debt to a whole lot. When you’re thinking about buying your first home, eliminating debt will be an important priority.
In order to get approved for a loan, your debt-to-income ratio must be within certain limits. If it’s not, you won’t be approved for a loan. So, if you’ve got an expensive car payment and your credit cards are mostly maxed out, you could find it hard to buy your first home.
Work on paying down your monthly debt a little at a time. In addition, don’t accrue any additional debts. When it comes time to make a large purchase, don’t buy it unless you have the cash to cover it.
By focusing on lowering your debt, you’ll make it easier when it comes time to buy your first home.
Bottom Line: Get Your Finances In Order Now To Buy A Home Later
It can take some time to get your finances in order. Even if buying a home isn’t on your radar right now, it doesn’t hurt to start thinking about getting your finances in order now so that when you do decide to buy a home it’s not hard.
Don’t be overwhelmed when it comes time to tackle your finances. It doesn’t happen overnight, it happens little by little. Don’t expect a big change overnight, it will be something that you need to work at.
Buying your first Knoxville home is an exciting and overwhelming experience. If you’re like most first-time buyers, you may not be sure where to start. If there is anything we can do to help you in your home search, please do not hesitate to contact us.
We’ve helped countless homeowners buy their first home and we’d love to do the same for you. Rick can be reached at 865-696-9002 or via email at Rick@KnoxvilleHomeTeam.Com. Kati can be reached at 865-696-1888 or via email at Kati@KnoxvilleHomeTeam.Com.