Financial Fitness: Buying a House

My husband and I are buying a house. At first I was very excited about this prospect. I am still excited, but I am learning that buying a house requires a lot of financial preparation!

First, the loan you end up getting will depend on your credit score. Check your credit report and your credit score often! You can get 1 free credit report each year ( There are also free services that allow you to monitor your credit score ( If you do have a lower score than you want, you can take action to bring your score up before you apply for a loan. For instance, I had a high debt to credit ratio, which was weighing my credit score down. By paying some of my credit cards off, I increased my credit score. You can also build credit history by paying your bills on time and taking a quick loan from time to time and paying it off in full.

Next, start thinking about a down payment. The higher your down payment, the more house you can buy. Furthermore, if you have a higher down payment, you are eligible for more loans. In this day and age, conventional loans usually require 10-20% down. There are other loans that require less than 10% down. Usually these loans are government loans, and they come with more “strings”. For example, a FHA (Federal Housing Administration) loan typically only requires a down payment of 3.5%.

Usually, if you put down less than 10-20%, you will be required to pay private mortgage insurance (PMI). Usually, this is required for both in-house bank loans and for government loans. It is important to note, that this insurance is not to protect you. It protects the bank in the event that you cannot make your mortgage payments. This typically runs around $200 per month, but it varies depending on the lender and the loan amount.

Finally, know that you will have to have cash on hand for more than the down payment. This was somewhat of a surprise for me. There are many things to pay for, some of which are included in the closing costs. Included in these costs are appraisal fees, inspection fees and loan origination fees. Sometimes the seller will pay some of these fees, but not always.

Buying a house is costly. You can save yourself a lot of money if you are prepared. Follow these tips to save the most money on a home purchase.

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