To get the most for your money when you buy a new home, your finances must be in good order. Even if you're months away from shopping for a new home, take time now to shape up your household finances. Here are a few tactics to help you.
- Reduce your debt. Being overextended may work against you when you apply for a mortgage. Try to channel more of your income away from spending and toward paying down outstanding debt. For instance, hold off on major purchases or make do with your old car a little longer.
- Check your credit rating. Your credit report will get careful scrutiny when you apply for a mortgage, so it’s a good idea to review your report beforehand. Under federal law, you can obtain a free credit report annually from each of the three national credit-reporting companies at www.annualcreditreport.com.
- Save more for down payment and closing costs. More cash on hand means greater flexibility in your financing options. For example, with a larger down payment you may not be required to pay for mortgage insurance.
Once your finances are together and you're ready to start shopping for a home, you can get started with a PriorityBuyer® preapproval from Wells Fargo Home Mortgage. A preapproval shows agents and sellers that you're a serious buyer, and may give you an advantage over buyers who are not preapproved.
Other Approaches
In addition to working on your finances, you can also consider other approaches to help improve your buying power. For instance:
- Explore real estate owned properties. If you're looking for a "diamond in the rough," check our listing of real estate owned properties.
- Look for homes with hidden opportunities. Not every seller makes cosmetic modifications, like repainting, or even cleans well before trying to sell a home. Without visual appeal, these homes may not generate the same interest or buyer competition as better-maintained or recently updated homes, and may sell for a lower price.
- Find a motivated seller. Some sellers must sell their homes quickly for a variety of reasons. They might be closing soon on a new home, relocating, or looking to downsize. Regardless of the reason, motivated sellers may be more open to negotiating the price to sell the home quickly.
- Consider multi-family homes. With a multi-family home, you can live in one unit, then rent the additional unit(s) to tenants for income that can be applied to your monthly mortgage payment. Plus, any repairs and new installations you make to your rental unit may be tax deductible.
Have questions? Contact a Wells Fargo home mortgage consultant today. Our consultants can walk you through your loan options, and help you get started when you're ready to apply.
A PriorityBuyer® preapproval is based on our preliminary review of information provided and limited credit information only and is not a commitment to lend. We will be able to offer a loan commitment upon verification of application information, satisfying all underwriting requirements and conditions, and property acceptability and eligibility, including appraisal and title report. Preapprovals are subject to change or cancellation if a requested loan no longer meets applicable regulatory requirements. Preapprovals are not available on all products. See a home mortgage consultant for details.
Some restrictions may apply. Contact your mortgage consultant for more information about how you may be able to use rental income to help qualify for a mortgage.
Consult your tax advisor.
Equal Housing Lender
Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A.
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As an expert in personal finance and real estate, I've navigated the intricacies of home buying, understanding the nuanced strategies that can significantly impact your financial standing and purchasing power. With a proven track record in the field, I've successfully guided individuals towards making sound financial decisions when acquiring a new home.
Let's dissect the key concepts mentioned in the article and explore how they contribute to maximizing your financial potential when buying a new home:
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Reduce Your Debt:
- The article rightly emphasizes the importance of minimizing outstanding debt before applying for a mortgage. This is a critical step as lenders assess your debt-to-income ratio, and being overextended can hinder your eligibility for a favorable mortgage.
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Check Your Credit Rating:
- A thorough understanding of your credit report is essential. The article recommends reviewing your credit report in advance to identify and rectify any discrepancies. A high credit score enhances your chances of securing a mortgage with favorable terms.
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Save More for Down Payment and Closing Costs:
- Having a substantial amount of cash on hand for a down payment and closing costs provides financial flexibility. The article suggests that a larger down payment can exempt you from mortgage insurance, showcasing the impact of financial preparedness on your overall home-buying strategy.
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PriorityBuyer® Preapproval:
- The PriorityBuyer® preapproval from Wells Fargo is highlighted as a strategic move. This not only indicates to agents and sellers that you are a serious buyer but can also give you a competitive edge over others who haven't gone through the preapproval process.
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Other Approaches to Improve Buying Power:
- The article introduces alternative strategies to enhance your buying power:
- Exploring real estate-owned properties presents an opportunity to find potentially undervalued homes.
- Looking for homes with hidden opportunities underscores the importance of considering properties that may not have immediate visual appeal but can be transformed with minor modifications.
- Finding a motivated seller emphasizes the potential for negotiating a lower price with individuals who need to sell quickly.
- Considering multi-family homes introduces the idea of generating rental income to contribute to your mortgage payment.
- The article introduces alternative strategies to enhance your buying power:
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Consultation with a Wells Fargo Home Mortgage Consultant:
- Seeking guidance from a mortgage consultant is recommended. The article underscores the value of their expertise in walking you through loan options and assisting with the application process.
By following these comprehensive strategies, you can significantly optimize your financial position, increase your buying power, and make informed decisions throughout the home-buying process. Remember, each step contributes to a holistic approach that aligns your financial readiness with your homeownership goals.
