Managing your finances takes careful planning, having a budget in place, and keeping funds set aside should an emergency arise.  You must know what your income is and how that balances with the expenditures that you have each week or month; maintaining a strong credit score and meeting your financial obligations combine to provide you with confidence when it comes time to buy your first home and undertake that first mortgage.  Getting a mortgage is a big deal which can impact your finances for years to come so careful attention to detail is paramount to the satisfaction that you’ll have with the mortgage that you get from your lending institution.

Finding the right mortgage for your dream may be a scary experience if you aren’t prepared.  It’s important to be informed, to do research on the programs that are available to you, and to keep some key factors in mind before you make a commitment.  The mortgage that you get should work for you, be affordable, and be a plan that doesn’t drain your savings or your budget.  Let’s look at four tips that you should know before you take a home mortgage and commit to making payments for years of your adult life.

1.    You should establish limits.  Take some time to determine how much you can afford to pay on the home of your dreams.  Take into consideration your income, current bills, long-term debts that you have, any credit card balances that you have, and the stability of your income.  The size of the loan for which you qualify will depend on the income that you have each month.  Your lending institution will have to feel that you have the ability to repay the loan and know that you have a history of honoring your financial obligations.  Most lenders prefer that your mortgage payment to be less than 31% of your total income.

2.    Do some comparison shopping.  You’ll want to get the best possible rate that is available to you and by comparing different lenders.  You can compare commercial banks, credit unions, mortgage-based institutions and other financial firms as a source of your home mortgage.  Take the time to understand all of the options that you have so that you can find a rate that meets your individual needs and that works for you.

3.    Get your financial house in order before you apply for a mortgage.  Any lending institution will determine how likely you are to make your mortgage payments on time.  If you are labeled as a high risk for not meeting your obligations in a timely fashion, your interest rate is apt to be higher and you’ll get less favorable terms in the contract.  Bad credit indicates that you might be a high risk for non-payment or slow payment so paying off as much of your debt as possible before you apply for a mortgage is a good idea.  You can also make a sizeable down payment on your home; should you be able to place 20% down, lenders will feel secure about making a loan to you since you’ve already made a sizeable investment in the property.

4.    Get pre-approved for a mortgage.  This means that you’re approved but you haven’t made a commitment as of yet.  This helps you to make a confident and informed offer on a home.

By getting all of your finances in order and educating yourself on the process you’ll be an informed consumer who is prepared to make a financial commitment for the home of your dreams.