Why is financing early so important?

Are you thinking of buying a new place? It’s a good idea to make sure your finances are as prepared as you are. Between the down payment, closing costs and other home expenses, you’ll need financial reserves at the ready.

What does that mean? A lender will want to see that you have money available beyond your immediate monthly payments. They need to know that you have enough liquid reserves to pay your mortgage if your circumstances change.

Don’t wait for a lender to ask about your assets. Get ahead of the underwriting process by knowing what you’ll need for mortgage approval — and how your finances stack up.

Understand your costs.
First, you’ll need money for a down payment on the home you want. The traditional amount is 20% of the purchase price, but it varies depending on the property.

Then, figure in another 5% for closing costs. These will come from your cash reserves — the money you saved up to buy a home.

Keep a good track record.
It’s not just about your financial situation at the moment you apply. Lenders prefer a history of healthy bank balances. That’s how they can see if you’re good at managing your money and paying your bills. 

It may also assure them that you didn’t borrow money from another source to qualify for their loan.

Learn what counts.
When considering your financial situation, lenders often start with your checking, savings and money market accounts, because they are the most liquid (easiest to cash in).

But if you own any CDs, stocks, bonds or mutual funds — including retirement accounts — lenders will most likely also count them as liquid assets.

Call or email if you have more homebuying questions, or if you’re ready to begin your search.

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