Actionable Steps for Improving Your Financial Profile and Purchasing a Home

By Millie Jones of seniorwellness.info

While it can feel daunting to try getting a handle on your debt as you also work toward purchasing a home, there's actually no better time to get your financial house in order. By following some simple, actionable steps, you can be well on your way to improving your financial profile and purchasing a home.

Create a Budget, Then Stick to It

Having a budget is step one in any debt reduction plan. You must know how much money you spend each month overall and how much you’re spending on various categories, such as groceries or home repairs. Note where most of your money goes each month, and identify areas where you can cut spending. Then create a realistic budget that includes a set amount to put aside for your home payment.

Prioritize Debt Repayment

You have two main choices for prioritizing your debt repayment. One option is to concentrate on paying more toward the debt with the highest interest rate. The second popular choice is to pay the smallest balance off first, motivating you to pay off successively larger debts. Regardless of which option you choose, you must still make minimum payments every month on your other debts.

Repair and Rebuild Credit

Repairing your credit involves more than reducing debt. Here are some key steps to start rebuilding your credit:

1. Pay every bill on time. This factor matters more than any other. For credit-building purposes, it doesn't matter if you pay more than the minimum, but it's wise to work toward paying as much toward your top debt as possible in every month.

2. Lower your credit utilization rate. Try to keep your rate below 10% but above 0% (one notable commonality in FICO Score high achievers).

3. Hold off on applying for new credit. Since hard inquiries can cause your score to drop, postpone applying for any new credit in the months leading up to your home purchase. After all, your goal is to lower your debt, not add more to it.

When You Need Assistance

For many, having 20 percent to put down can be too much of a financial hurdle. In these situations, options are still available. FHA loans, the Homeownership Voucher Program, and state-funded grants are some of the possible choices. Eligibility is determined by a number of factors, including income, home price, work history, and location.

Another appealing option to consider is a Lease Purchase Program. Potential homebuyers pay rent at a property of their choosing for a set period of time, with the obligation to purchase the property before the lease has expired. This option allows individuals to secure a home immediately while giving them extra time to build their credit or improve financial hardships. Qualifications for a lease-to-purchase program are far more flexible than those for securing a mortgage.

Multiple Paths to Success

While improving your financial position is always a smart decision, regardless of whether or not you plan to purchase a home, even greater incentives come into play when home buying is on the horizon. Strengthening your credit, reducing debt, or working with a company such as CCH Lease Purchase are steps you can take to properly position yourself to make your home purchase.

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