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​Managing Your Finances if you Plan to Buy a Home in Denver

January 18, 2017

If you plan to buy a home in Denver, you need to take some time to plan your finances. There are a few key things you need to maintain that will not cause your mortgage company to change terms of a loan. Learn more about these financial tips as you prepare to take the next step.

Clean up your credit and save:

When you know that you are ready to purchase a home in the future, there are a few things you can do to help you get the best loan possible. For starters, start saving for your down payment. Depending on your situation, you may put anywhere from five percent to 20 percent down. A good way to start saving is taking money that you plan to use for your monthly mortgage and put it towards your down payment. This will allow you make the monthly payments all while saving. Next, work on improving your credit score. To do this, stop buying unnecessary items and pay down debts. You can see your score for free at Credit Karma. Checking your score this way won’t lower your score the same way it would if a business was running it to give you credit. Avoid making any purchases or taking out loans that would require a bank or business to run your credit as it will lower your score.

No large purchases:

Once you have made the decision to proceed with the home buying process, avoid making other large purchases. Your goal will be to keep your credit as-is because a potential mortgage company will be watching it. When you spend a large amount of money, whether it is a new car or an expensive piece of jewelry, it will affect your debt-to-income ratio. This ratio is the percentage of your gross income that goes towards monthly bills. It can also affect your score. So, before you start your process, make sure you are set on everything and can maintain everything until you close. Your bank will be checking your credit often and any changes can change the terms of the loan, or even the bank’s decision.

Understanding what you can afford:

When going into a new home loan, it is important to know how much you can afford. Saving for your down payment by setting aside money that you eventually plan to use as your mortgage may help. A bank will look at a variety of factors prior to giving you the terms of a loan. They will review your credit history, debts and the amount of what you can put down. Ideally, your monthly mortgage payment should max out just under 30 percent of your monthly gross income. Upon receiving the potential terms of a loan, you need to make sure you can handle it if it is higher. You do not want to get yourself into a situation where you are struggling on bills.

When you are ready to purchase your next home, Giving Back Group can help. Together, we can make a difference as 20 percent of our commission is donated to a charity of your choice. As we move into the colder months, learn more about finding Denver real estate in the winter season. Give us a call at 303-881-4881 to get started.