Getting your finances in order to help buy a home

If your looking to buy a home in the next 12-24 months, you will need to assess you financial situation and get everything in order. The following are some tips or guidelines for strengthening your financial situation.

• Establish a good credit history by making your payments by the due date. Many people don’t realize that even paying your utility bills late will damage your credit rating. Pay all your bills on time and try to pay off your entire balance each month.

• Get control of your expenses. Even little expenses like daily cups of coffee or going to lunch instead of bringing one to work add up. $5 per day saved comes to only $25 per week but comes to over $1,200 of annual savings. Try writing down everything you spend for one month and it will give you some ideas of where you can start to save. Maybe even consider purchasing a personal finance software, like Quicken or Microsoft Money.

• Reduce your debt. Lenders look for a total debt load of no more than 36% of your total income. Paying down your installment debt such as car loans, student loans and revolving balances on credit cards and greatly increase your buying power. Lowering your total debt may also make you feel more comfortable taking on a mortgage payment that may be slightly higher than what you are paying for rent or higher than your current home.

• Start saving now! Create a house or down payment fund. Don’t just put away what you have leftover after each months spending. Figure out what you can safely save each month and open up a special account and have the money automatically sent to that account each month. Look at it as forced savings. You can still buy a house for as little as 3.5% down.

• You may want to try to increase your income, at least temporally, by getting a second part-time job. The extra money you make might give you the additional amount that you need to fund your house fund. Taking away some of you idle time might also reduce you expenditures.

• Not sure what to do next? Either contact me for a FREE no obligation personal consultation or contact a mortgage loan officer. If you don’t know a loan officer, call Randall Fowlkes at (630) 399-9291 or check out his web site, www.randallfowlkes.com, that is filled with other financial advice and information.