Tuesday, April 29, 2014

Preparing Your Finances to Purchase a Lexington Home

There are many things to consider when you make the decision to purchase Lexington, MA real estate.  One of the most important is whether or not your finances support your desire to buy a home.  Taking the time to evaluate your finances before you start your search will help to streamline and prevent complications in your buying process.  So what should you do to help prepare yourself financially to buy?

Determine what you can afford.  As a rule of thumb, your mortgage payment should not exceed 30% of your net household income, and some loans require it to be less than that. The amount of money that you have available as a down payment for your Lexington home will also affect your borrowing limit.  Use a mortgage calculator to establish a price range your income will accommodate.  Be sure to take other monthly costs into account such as insurance and taxes.

Be diligent with your budget.  Whether you’re looking to buy your first Lexington real estate or to upgrade from your current, you should have a monthly budget in place.  Having a budget helps you keep tabs on exactly where your money is going.  Revisit it frequently to see if you need to make adjustments.  Are you consistently over-spending in one area?  Are there any areas where you may be able to cut back?  Sticking to a budget will help you control your spending, eliminate debt and save more for your down payment.

Evaluate your credit.  Your credit rating is a critical factor in qualifying for a mortgage.  Check your credit report regularly and monitor your score.  Review your report for inaccurate information, and get it corrected quickly.  If you are carrying revolving debt, pay it down as much as possible because your debt-to-credit ratio is also important to lenders.  A solid credit rating will not only help you get approved for a loan, but will also affect the loan type and interest rate for which you will be eligible.   

Consider getting pre-approved.  If you feel confident that you are in a financial position to start your Lexington home search, it may be time to look into a mortgage pre-approval.  Doing this will tell you exactly how much you're qualified to borrow.  In today’s competitive market, being pre-approved will also give you an advantage over other buyers who are not.  Sellers will find your offer more appealing knowing that you are able to get a home loan.

Sorting out your financial picture is the first step to ensuring a smooth home buying experience.  If you’re ready to start looking for your new home, find an knowledgeable Lexington realtor to assist you.  An experienced professional can help make the entire experience a positive one.

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