There are several essential financial steps you should take before purchasing a home. You should have your finances in order six to twelve months before even looking at houses.


Make sure you pare down as much of your debt load as you can. Most lenders would prefer your debt to be no more than 38% of your total income. Your preferred debt to income ratio should be under 43%.

The Best Approach for Paying Off Debts

There are different opinions on this topic. Some say it is best to take baby steps and pay off your smallest debt first. While others say, it’s better to work on the more substantial debts. Many professionals focus on the interest rates and recommend you pay off the higher interest rate debts first. Whichever way you decide to approach this task, it is essential to lower your debts as quickly as possible.

Down Payment

Save, save, save. It only makes sense that the more down payment you have, the smaller the mortgage you will require. Having a smaller mortgage will make your monthly payments lower. Many people have a difficult time when saving money. The best thing to do is treat saving like its a bill. It must be paid. Some people have automatic transfers from one account to another on payday, so they don’t even miss the money. You can make use of a tool such as a calculator to help you determine your down payment.

Credit Report

If your credit rating is not good, now is the time to fix it. Ensuring you always pay all your bills on time is the best thing you can do to establish a good credit rating. Using a secured credit card and paying it off is another way to improve your score. Each time you apply for any credit, it will initiate a hard credit inquiry, which directly affects your credit score. Credit scores are based on the kinds of credit accounts you have, how many you have, and how long you’ve had them.

Shop for Mortgage Rates

There are so many lenders available. It is undoubtedly best to shop around to find the best mortgage terms and rates available to you. There are banks, trust companies, and even private lenders. Always do a lot of research to ensure you will have protection for your mortgage.

First Time Home Buyers

There are several incentives and useful rebates available for first time home buyers. First time home buyers may not require as large a down payment.