"It was finally time for us to buy something of our own, bigger than what we were in because our family was pretty big and kids were sharing rooms."
Does that sound familiar? Dave Eckert and his family had outgrown an apartment and a rental house. They wanted a place to call their own that would hold their family. Plus, with a house of their own they could change things like the layout to fit their needs without dealing with a landlord. It was time to buy a house.
"There were a lot of things that had to start occurring at that point in time," Dave says. "There was debt that I had that had to be cleared before we could go any further. That required me getting a second job so that I could pay off items that I had in collections. So, at the time I was working a regular job 8-to-5 and then I was delivering newspapers from 2 in the morning until 6 in the morning."
Is the second job and sacrifice worth it? Dave and his wife Kathy both say it was absolutely worth the hard work to get their credit mortgage-ready so they could buy their own home. They say it's not always easy and fun, but the home buying process is well-worth the work.
We sat down with Dave and Kathy to talk about their journey to home ownership. How long does it take to buy a home? What happens when 2 divorced people combine debt and income and a blended family? How do you get your credit ready for a mortgage? These questions and more get answered in the Eckert's story. See their video below.
One of the first steps any potential buyer should take is mortgage pre-approval. Don't worry, pre-approval doesn't lock you into one lender. It's not a contract that means you have to go with that lender. At least, it shouldn't be. Instead, what pre-approval does for you is it tells you whether your credit will help or harm you in your home buying journey, and just how much house you can afford.
Mortgage pre-approval will let you know what your house payment should be to meet your budget. Knowing this will direct you to the kind of houses you should consider with a real estate agent during house hunting. Plus the bonus is that with a pre-approval letter, you're typically more well-positioned to negotiate right away, rather than waiting to get word on financing from a lender when you're ready to make an offer.
Paying Down Debt
The less debt you have, the better off you typically are when securing financing for a mortgage. Keeping your credit card debt below 30% of the card limits will help keep your FICO score up. Just make sure you're not closing the card down when you pay them off. Keep a varied credit history and your score should reflect that you're a seasoned consumer. That's good news to the credit bureaus.
A word on collections: When looking at your credit report (on your own or with a professional), keep in mind that old collections that are not reporting currently may not need to paid off. When you pay on an old collection that's not reporting currently, it becomes current and can affect your FICO score negatively. Before you pay a collection, talk to your mortgage consultant and assess whether it's a current collection that's actually affecting your credit score. If it isn't, you may want to wait to pay it off until after your loan is closed.
Save Money in Your Savings Account
It takes money to borrow money. Whether it's a down payment for the mortgage or closing costs like fees and escrow, you'll likely need at least some cash in hand at the closing table (in the form of a cashier's check, not a pile of actual cash). Putting money in your savings account or checking account is the best way to prove you have the money. Lenders love a paper trail.
When it comes to the amount of cash you may need to save up, it varies on many factors. Below are a few articles that break down the costs with some of these factors taken into consideration.