Purchasing a home may well be the most significant financial decision of your life—so how do you ensure that decision is a prudent one? There are a few steps that first-time homebuyers can take to prepare for it.

Get Your Credit in Line

First, improve your creditworthiness. If your credit score is down in the 600-range (or lower), you’ll have a harder time finding a loan, and will likely have higher interest rates and larger down payment requirements. A score that exceeds 700 will get you a better overall mortgage loan.

So how can you ensure strong, healthy credit? Pay down any existing debts you have. Make sure you’re making your bill payments on time. And stop applying for any new lines of credit (including credit cards) until you close on the home.

Determine How Much House You Can Afford

Don’t fall in love with any listings until you have some sense of what you can afford. To do this, sit down and look at your monthly budget. As a general rule of thumb, a home loan payment shouldn’t be more than 28-35 percent of your total monthly income.

Keep in mind that you’ll also have some additional homeownership experiences to factor in—including insurance, utilities, and home maintenance costs.

Start Saving Some Money

In order to buy a home, you’ll need to have a little money in the bank. You’ll need money for a few things—most notably the down payment. Most loans will require a down payment of roughly 20 percent the total home purchase price, though you can find loans with much lower down payment requirements, too. Also make sure you save a little extra for closing costs, which could be anywhere from three to six percent of the total home purchase price. (The seller may end up paying some or all of the closing costs, but you can’t bank on that.)

It is also wise to have a small emergency fund—even if it’s just $1,000 or so—to help defray any unexpected home repair costs that arise. This isn’t necessary, but it is smart.

Get Pre-Approved for a Mortgage

Compare mortgage interest rates and find a lender you feel comfortable with—and when you do, ask about getting pre-approved for a loan. This is an important step because it will make your mortgage loan application go much smoother and faster. What’s more, some sellers will actually require pre-approval in order for your offer to be considered. Your lender will walk you through the process and explain to you what makes it so important.

If you’re ready to talk about pre-approval, or simply have questions about current mortgage interest rates, we’d love to talk with you. Reach out to us today to learn more about getting pre-approved for a mortgage loan in Los Angeles or the surrounding area.