How To Get Your Finances in Order Before House Hunting

Buying a home is a substantial investment; you want to find a property that fits your budget, belongings, and your needs. You don’t want to fall in love with your dream home and find out after that you can’t afford it. Before browsing the housing market, you’ll need to have certain things in place. 

Need help budgeting for your first house? These tips will help you figure out your finances:

Get Pre-Approved for a Mortgage

Before a seller will consider your offer, they’ll want to see proof of pre-approval. This document certifies that a mortgage lender will lend you money up to a designated amount. 

How do you get pre-approved? A bank, lender, or credit union will approve or deny your application based on a few things: 

Your debt-to-income ratio

Any other loans you have (like another mortgage, car payments, or student debt) will factor into your pre-approval. 

You might be wondering, “Do I need to sell my home in Vancouver before buying a new one?” The answer is yes—otherwise, it will lower your chances of getting pre-approved (unless your income is high enough to compensate for it).

Income & employment history

How long have you worked at your current job? If you’re self-employed, you’ll need to provide extensive documentation to prove that you have a stable income. And if you’ve worked at your current job for less than two years, you might require documents from your previous employer. 

Credit score

How healthy is your credit score? This number is affected by several factors, including:

• Do you pay your bills on time?
• How many years of credit history do you have?
• Do you use more than 30% of your available credit?

Based on this information, lenders can see how reliably you pay back the money you owe. A good credit score makes them more likely to approve your loan—a bad score is a red flag.

After reviewing these documents, the lender will either approve your mortgage, approve it with conditions, or deny it altogether. 

Keep in mind that most pre-approval letters will expire after 30-90 days. Since your financial information can change during this time, you may require another pre-approval letter. 

Setting Aside a Down Payment 

The more money you save up, the lower your monthly mortgage payments will be. You’ll also pay less interest when you take out a smaller loan. This will help you get pre-approved from a lender since you’re at a lower risk of defaulting on payments. 

Factor in Closing & Moving Costs

You’ve put together an ironclad budget that factors in everything from your home insurance costs to your groceries. But when you buy a house, you need to cover a few extra expenses, including closing costs, property taxes, and transfer taxes. 

Expenses like these emphasize the importance of tax planning. By planning ahead, you can make sure you aren’t caught off guard by a large bill. 

Open an Emergency Savings Account

Owning a property can be unpredictable. One week, it seems like everything is in order—the next, you find that your roof has a leak, and it needs a $5,000 fix Cover yourself in case of an emergency with a savings account. 

Purchasing a home is an incredibly exciting event. But if you aren’t prepared for the costs of homeownership, it can be a bit daunting. We hope this guide helps you budget for the costs of buying a house.