Dreaming of Homeownership? 3 Steps to Start Now

Owning a home is one of the primary sources of wealth for most Americans. So, what can you do today to prepare to buy a home in the near future? Here are three steps you can take to be ‘home-ready!’

#1 – Start a down payment savings plan for 3 to 5% of your purchase price

Open a separate savings account just for your down payment fund. Start making regular deposits to get in the habit of putting money aside. (It’s okay to start small.)

Why a separate account?

So that you’re not tempted to spend it, and to create a dedicated account that only exists to save up funds for your home purchase. (Lenders like to see an account with a steadily growing balance and infrequent withdrawals.)

Tip: Set up a direct deposit of part of your paycheck to go into your savings account. Most employers are happy to split your paycheck deposit between two or more accounts.

Aim to save 3 to 5%

There are many first-time homebuyer programs that can help you buy a home with a lot less than the ‘traditional’ 20% down payment. Shoot to save up 3 to 5% of your targeted purchase price.

#2 – Raise Your Credit Score

You don’t need ‘perfect’ credit to buy a home, but a good score makes it easier for you to qualify for the best interest rates available. If you can get your score above 720, it will help you save quite a bit on interest payments.

How?*

1. Pay your bills on time. (Your payment history accounts for 33% of your score!)
2. Get all credit card balances below 30% of your available credit limit.
3. Look for errors in your report and contact creditors to get them fixed. You can get free credit reports each year from all the major reporting agencies here: com
4. Don’t take on new debt. We know life happens, but it’s better to delay big-ticket purchases until after you’re in your new home.

Learn more about credit scores

#3 – Practice “owning” a home

Talk to a Mortgage Banker to help you estimate what mortgage you can qualify for and what those payments would look like. This will help you understand what your monthly budget will be so you can ‘test’ living with a mortgage payment.

For example, if your monthly rent is $2,000 and your estimated mortgage payment would be $2,500 a month, take the extra $500 and put that into your separate savings account for a few months.

It’s like a test period to make sure you’re comfortable with the new payment. You will see if your budget feels stretched or not before you have the responsibility of the mortgage.

You’ve got this: We can help!

Owning a home is still one of the greatest financial moves you can take. Talk to one of our Mortgage Bankers today about getting ready for your first home purchase!

*This is for general educational purposes only and not intended to be personal financial advice. Consult with a credit counselor for guidance on specific steps for raising your credit score.