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Are you tired of renting in Chicago? It’s a dream for many of us to have a home to call our own. And it makes perfect sense — why pay someone else’s mortgage when you can be investing in your own home and your own future? But making the jump to homeownership is a big step, and one you need to be financially prepared for. So, before you call up that Realtor to get started, here are a few things to keep in mind:
Know Your Credit Score
When a bank is deciding whether or not to grant you a mortgage loan, the first thing they look at is your credit rating. Request a copy of your credit reports online and review them. Look for anything inaccurate and report it to the credit reporting agencies. You can challenge any item with an incorrect address or a misspelled name, and it will be removed from your report and raise your score. The higher your credit score, the lower the interest rate on your loan. So, don’t skip this step. If your credit score is still lower than you want it to be, there are a few things you can do to improve it. Consider paying off small debts and having multiple tradelines that are in good standing. The effort you put in here will be well worth it down the road.
Understand Your Budget
Creating a budget will tell you exactly what you’ll be able to afford. Viewing homes that are out of your price range can be dangerous business. But knowing what you can afford can keep you from wasting time looking at listings that are out of your price range, and it removes the temptation to stretch your budget too far and end up in a pickle later on. Sticking to your budget will help you make sure that you don’t get in over your head.
Save for a Down Payment
Having a bank agree to finance 100% of your new home is unrealistic. Putting 20% down is standard and will give you many options. You can often secure financing with less down, but it’s not usually advisable. Your best bet is to save until you have a 20% down payment ready to go.
Be Aware of Closing Costs
Apart from your down payment, you may also need to pay for closing costs like a home inspection, title fees, and loan origination fees. There is a possibility that you can negotiate with the seller to pay some of these costs but don’t count on it. You should understand the closing costs and have the funds available.
Once you’re financially prepared to get started with the homebuying process, you’re only a couple steps away from owning a home of your own. But if you want to have a stress-free experience, getting your finances in order before you begin is smartest way forward.
If you’d like to get preapproved for a mortgage to see what you’re working with, or if you’d like a recommendation for an experienced, local Realtor, please reach out to us. We’re always happy to help.