Prepare Your Finances to Buy a Home:

Check out these recommendations to help you financially prepare for home ownership, from creating a list of must-have home features to examining various loan kinds.

This is the most important part of communication. Of course, don’t wave your hand by indicating how much you can afford and focus on total costs rather than monthly payments. It’s okay if you already have approved credit from another lender.

1. Understand what you need and want in a home:

Before you start looking for a new home, consider what features it should have. Ask yourself questions about the type of you’re searching for, such as what floor layouts you prefer and whether you require rooms like a laundry room or an office. After all, you want to be happy and comfortable where you live, therefore thinking about your needs should be the first step.

Examples to consider include:

Do you need additional space? Make a note of the minimum number of bedrooms and bathrooms you want, as well as any storage elements you must have.

Is anyone in the household working remotely or taking online classes? When looking for a new house, a flexible space or private office may be a top consideration.

Do not forget about your hobbies. Like to bake or repurpose furniture? Look for homes with plenty of counter space and a kitchen island, or use a garage as your workshop.

Prioritizing features like these can help you limit your options and stay focused as you work out your budget.

2. Decide how much you can afford:

Examine your monthly salary and determine how much you can contribute towards a mortgage payment and homeowners insurance. It’s also a good idea to consider any additional fees that may arise when you own a home. For example, if you currently live in an apartment with no garden, keep in mind that you may need to pay for additional lawn care charges.

Being honest about your budget can help you choose what price range you should look in. We recommend that you use your new budget for several months to adjust to any changes, and then assess your financial comfort level. If you believe your finances are tight, you should reconsider your budget.

We also recommend avoiding any new debts or credit inquiries that result from major expenditures such as a new car or applying for a new credit card when actively looking to buy a home. These can lower your credit score and reduce your buying budget.

3. Check your credit score:

Your credit score is an important part of what lenders consider when reviewing your mortgage application. It can affect the loan amount and interest rates you can get. Avoid surprises by checking your credit score for free before you apply for a loan. That way, if you find errors in your essay, you’ll be able to dispute any mistakes that may be lowering your score. If your credit score isn’t where you want it to be, you can work to improve it while you save up for a home.

4. Plan for any additional home-buying costs:

When acquiring a home, keep in mind that there may be additional expenditures beyond the down payment. Prepare by accumulating money for things like closing costs, which might vary depending on the price of the home you’re buying and the financing you pick.

5. Learn about different types of loans:

Some loan kinds may be a better fit for your position than others, so you should research the conditions for each loan before approaching your lender. Conventional, FHA, USDA, and VA loans are some of the available options. USDA loans are primarily for rural house buyers, whereas VA loans are for service members, veterans, and their families. HUD.gov also provides information about first-time homebuying programs in your state.

6. Locate your home:

Of course, you can’t overlook the enjoyable aspect of house hunting. Clayton wants to make it easy for you to find a house, so you may search online for prefabricated and modular in your area and filter them by number of bedrooms, price range, and desired amenities. You can also visit your local home center to explore your favorite houses and ask our home advisors any questions you may have regarding the home-buying process.

7. Check with many lenders:

Loan terms and fees, as well as the types of loans available, may differ depending on the lender you choose. Some specialize in financing for manufactured and modular homes only.

When selecting a mortgage lender, consider interest rates, loan costs, and the required down payment. Also, ask each lender if they have any down payment assistance programs. If you have any further questions, contact your lender to help you better understand the process.

8. Start preparing your documents early:

You can ask lenders for a checklist of information you’ll need to supply when applying for a loan, but most lenders will require basic data such as employment history and evidence of income.

Below are some samples of things you might be asked to provide:

• Tax returns, W-2s, and 1099s for the last two years
• Current pay stubs.
• Your Social Security card, driver’s license, or ID.
• Bank statements for the last three to six months.
• If relevant, include verification of income from retirement, Social Security, alimony, child support, and so on.
• Locating and organizing these documents as soon as feasible will make the loan acceptance process go more easily because your information can be checked faster.

Now that we’ve gone through these useful steps, would you like to read some more buying advice? Learn more about buying on our Studio blog. When you’re ready to take the next step, you may open a Clayton My account to store your favorite floor plans and features, learn more about the buying process, and connect with a housing specialist all in one location.