If you are planning to buy in 2021, now is the time to start preparing. Whether you are 3 months out or a year out, you can begin getting things in place for purchasing your new home. Here are some things to think about: 

  1. Your Credit Score. Your credit score will play a huge role in how much you can afford when it comes to purchasing a home. While you can’t improve your credit score overnight, there are somethings that you can do to increase it (or at least make sure it does not decrease) in the coming months. Make sure that all your current credit bills are paid on time. Refrain from any large purchase on credit. Keep your current credit card balances as low as possible. 
  2. When saving to purchase your new home, there are a few things to consider outside of just the down payment. Usually, you will have the cost of the inspection, the appraisal, closing costs, and repair and maintenance costs. I suggest saving for the following: 5% – 20% of the purchase price for your down payment, 2% of the purchase price for closing costs, at least $1,000 for the inspection and the appraisal, and at least $2,500 in savings for potential repair and maintenance costs.
  3. Get your Financial Documents in Order. Lenders require more documentation than they used to, so it is something I always suggest getting in order before applying. The documents a lender will require vary depending on the situation, but the following are a good rule of thumb.
    • Tax returns
    • Pay stubs, W-2s, or other proof of income
    • Bank statements and other assets
    • Credit history
    • Gift letters, if using funds that were gifted
    • Photo ID
    • Rental history, if you don’t already own a home
  4. No Big Purchases.  During the loan process, your lender is going to be looking at your Debit to Income as well as funds that you have on hand to pay for the down payment, closing costs, and future payments. Big purchases can affect these numbers because 1) if they are bought using credit, your Debit to Income with change and 2) if they are bought with cash, your fund on hand will be affect. It is wise when purchasing a home to hold off on large purchases like new furniture, a new tv, or a car until after you have bought your new home. 
  5. Your Job.  In regards to your loan, your lender is going to look at your ability to pay back the loan. They want to see stability in your job, usually requiring tax returns for two years. If you are looking to buy in the near future, you don’t want to be looking for and starting a new job at the same time. However, an exception is usually if it is a job in the same field or a promotion. 

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