Credit doesn’t have to be the elephant in the room. The best way to address your credit situation is to know about it first. When embarking on a home purchase, it’s important picture of your credit. Here’s everything you need to know about pulling your credit report!

Keep in mind, your credit report is different from your credit score. Credit reports basically take a snapshot of your current credit situation. This is important because you can analyze your credit report to understand what you could be doing better and whether there is any inaccurate information on your activity.

Did you know you are entitled by law to one free credit report per year?

Here’s how you can pull your report in less than 5 minutes:

Go to AnnualCreditReport.com.

Click on “Request your free credit reports.”

You will be prompted with a form to fill out.

Fill out all of the fields and you will receive the ability to review your report.

Now for the other big step…

Now that you have your credit report, you have an understanding of how your activity over the past year has affected your credit. 

But how about your credit score?

A mortgage banker will pull your credit when you decide to start searching for a home, but it’s important for you to be empowered by knowing where you stand. 

When it comes to credit scores, the sooner you know your situation, the better it is, in case you need to work on your credit before being approved to purchase a home.

Let’s painlessly pull your credit with Credit Karma.

Click on “Get your free scores” from the Credit Karma homepage.

Create an account

You will then have a small form to fill out before getting your score.

Bingo! That’s it!

Hoping you are happy with your scores. If not (or even if you are), this next step is for you:

Nobody wakes up in the morning saying “I wish I had a worse credit score today.” Whether you are in the 800s or the 500s, it’s always advantageous to improve your score.

Here are 3 things you can do in 5 minutes to improve your credit score:

1. Pay off your balance

Ok, this one seems obvious, but maybe you just need that extra push. Later on in this guide you’re going to learn about some budgeting tools and how they can help you set goals and set aside money.

But even right now, if you are looking to make quick improvements to your score, it doesn’t hurt to prioritize paying off the balance on your cards before making other purchases.

2. Get another credit card

Are we saying to get another card and use it immediately? No way! However, if you are unable to pay off your balance, having a low credit utilization ratio could be damaging your credit score.

Here’s the definition of Credit Utilization Ratio from Investopedia so you don’t have to look it up:

“The percentage of a consumer’s available credit that he or she has used. The credit utilization ratio is a key component of your credit score. A high credit utilization ratio can lower your score, while a low credit utilization ratio can raise your score. FICO’s credit-scoring formula assumes that consumers who use more of their available credit are riskier borrowers than those who use less of their available credit.

The credit utilization ratio is the amount of outstanding balances on all credit cards divided by the sum of each card’s limit, and it’s expressed as a percentage. Credit issuers like to see a credit utilization ratio of approximately 35% or less.”

Essentially, getting another card and keeping the balance low can help raise your credit score in the short term. 

Want help picking the perfect card for you? Check out Tip #9.

3. Increase your credit limit

Once again, this is not license to spend! However, an increased credit limit also helps you Credit Utilization Ratio.

4. Dispute mistakes on your credit report

The credit bureaus aren’t perfect. They make mistakes too. 

We’ve shown you how to pull your credit report in Tip #1, now let’s show you how to dispute mistakes.

First off, you’re going to want to draft a letter to the credit bureau to request that they fix the error.

Here’s a sample letter provided by the FTC;

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[Your Name]

[Your Address]

[Your City, State, Zip Code]

[Date]

Complaint Department

[Company Name]

[Street Address]

[City, State, Zip Code]

Dear Sir or Madam,

I am writing to dispute the following information in my file. I have circled the items I dispute on the attached copy of the report I received.

The item [Identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgement, etc.] is [inaccurate or incomplete] because [describe what is inaccurate or incomplete and why]. I am requesting that the item be removed [or request another specific change] to correct the information.

Enclosed are copies of [use this sentence if applicable and describe any enclosed documentation, such as payment records and court documents] supporting my position. Please reinvestigate this [these] matter[s] and [delete or correct] the disputed item[s] as soon as possible.

Sincerely,

Your name

Enclosures: [List what you are enclosing]

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Each credit bureau has it’s own dispute page on their website.

Here’s experian’s:

Click on “Start a new dispute online"

You will be prompted to enter some information so that they can verify your identity.

Once you have filled out the form, you will have the ability to attach your letter and and file the dispute.

You can return to the same dashboard later to check the status of your dispute.

Voila! Now let’s keep rocking this home purchase preparation.

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It’s not a good idea to go into a home purchase blindly.

Before taking major steps toward buying a home, it’s important to understand the state of the real estate market and start zeroing in on areas in which you may want to buy.

Follow this step-by-step guide to become a real estate whiz and find the perfect neighborhood for you:

Step 1: Use AreaVibes to find neighborhoods with high livability scores and learn why they got high scores.

If you type in a city you will get an overall score and a breakdown of grades for particular categories:

You can also dig deeper to find more information on each category.

Step 2: Use Neighborhood Scout to find crime rates and neighborhood trends

Like AreaVibes, Neighborhood Scout allows you to type in a city.

It then breaks that city down into small neighborhoods for you to analyze.

It focuses more heavily on crime and neighborhood trends, so you can make an informed decision about a particular neighborhood within your city of choice.

Step 3: Use Mortgage News Daily to find updated rate information

The mortgage rate you end up with will have a major impact on the cost of your home over time.

While you won’t be able to get an exact rate for yourself from this tool, it will help you decide whether or not now is a good time to buy.

It’s also a great tool for reading articles and learning about the state of the industry.

But for now, we’ll focus on rates.

Go to the Mortgage News Daily website.

Click on “Today’s Mortgage Rates.”

You will get an immediate snapshot of today’s average rates for different mortgage products.

You will also get trends over the past few years.

Step 4: Look for up-and-coming neighborhoods

To preface this:

There’s nothing wrong with buying a home in a neighborhood that’s already great, or a neighborhood you love that is considered “bad.”

With that said…

Typically, buying a home in a neighborhood that is slated to improve is a good investment.

Your property value will go up as the neighborhood becomes more desirable.

Here’s how to identify an up-and-coming neighborhood:

1. Public transportation systems are being added.

Look for more bus lines or light rails.

2. Rents are slowly but surely going up.

If renters are paying a premium, it’s a good sign that things are looking up in that area.

3. It is becoming a hotbed for art and creativity.

If the area is becoming “cool,” investment will follow.

4. New schools are being built.

Accessibility to good schools is a huge motivator for neighborhoods to become more desirable.

5. New big-box stores are being built.

People love convenience.

If a big box chain is putting a new store in a particular area, they have done your research for you and identified that it’s a good place to be.

6. “Crowd-favorite” chains are popping up.

Similar to the big box store concept. If Starbucks thinks it’s a good idea to open a coffee shop there, it’s a good sign for the neighborhood’s status.

Ah, the million dollar question: 

“Should I buy a home and start building equity or should I rent for a little while longer?” 

No reason to ask yourself that question anymore because this calculator will help you figure it out!

Go to The New York Times’ Rent vs. Buy Calculator

This is a great tool because it not only helps you decide whether it’s more cost-effective to rent or buy. It also asks you questions that you will need to think through before being serious about buying a home, like “how long do you plan to live there?”

Let’s fill out the first two sections with the average price of home you’re looking at and the amount of time you plan to stay:

Now enter expected mortgage rate, down payment amount, and length of the mortgage.

Unsure about what numbers to use in these fields? That’s fine!

Actually, that’s the whole point of this exercise. Play around with the amount of money you are thinking of putting down and the mortgage term, and check out how they change the monthly payment.

The rate is usually pretty indicative of current rates, so unless you have locked a rate, feel free to leave that number where it is.

Found your sweet spot? Great! 

On to the next questions:

This is another area that will be custom to you. Are you getting fantastic returns on your investments and consistently adding to them? 

You will want to factor that in.

Is the neighborhood you’re looking at experiencing a higher-than-average home price growth rate? 

Also a big factor.

On to taxes:

Taxes are yet another factor that will vary from property to property and neighborhood to neighborhood.

Enter a number representative of the home’s you’ve been looking at. 

If you haven’t been looking at homes, enter a number you are comfortable paying.

Yes, it costs money to buy and sell a home. 

If you are selling a home in addition to purchasing a new one, you will want to make sure you consider that cost.

Often, when buying a home, your realtor can negotiate the payment of closing costs with the seller. However, this is not a guarantee that the seller will pay closing costs.

It’s important to set an expectation for yourself that closing costs may be part of the equation.

Fill out the remainder of the field for expected maintenance costs, association dues, if any, utilities and insurance.

These are costs that go hand in hand with homeownership, but they are also costs that help maintain and add value to your home.

Once you’re done, you will see the results toward the top right of your screen:

In this particular scenario, buying a home is advantageous over the course of 9 years, unless I can find an apartment or home to rent for less that $918 per month.

Feel free to evaluate your results and make an informed decision!

We should probably figure this out before we move forward with anything else, right?

A lot of people start looking at homes before they know what they can afford. Bad idea. 

Do this first so that you can look with confidence and avoid the heartache of falling for a house that would make you go over your budget.

Let’s use NerdWallet’s Home Affordability Calculator.

Start by entering the zip code of the primary area where you would like to find a home:

Now type in your annual household income (We won’t peek!):

Now much much are you planning on putting down? 

You may not have a number in mind. Totally fine.

This is another great way to play around with numbers and get you more confident with the process.

For now, just enter in what you are comfortable putting down:

Any student loans or car loans? Enter them in the next section:

Now, do you know your credit score?

If you went through Tip #2 you do! If not, that’s OK too.

Enter your credit score to continue.

And there you have it!

Feel free to play around with the numbers if you feel the monthly payment or home price are too high or too low.

This tool is great because it shows you three ranges:

Affordable, Stretching, and Aggressive.

Have fun!

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Amortization is simpler than the word sounds.

An amortization schedule shows you how long it would take you to pay off a house of a certain price, breaking down every single payment. 

It also shows you a breakdown of every single payment throughout your mortgage, including how much of that payment is going toward principal and how much is going toward interest.

Want to know how much equity you could have in your home after 5 years? This is a must for a responsible homebuyer.

Let’s start by following the link.

Fill out the first section:

Remember, the whole point is to play around with the numbers and arrive at a result that is both realistic and comfortable for you.

Next, click on “Calculate.”

You will get a new set of numbers in the second section that show a monthly payment amount based on your answers to the initial fields.

Now, click on “Create Amortization Schedule.”

You will get a very long list showing every single payment.

It also shows how much of each payment will go to principal, how much will go to interest, and how much of the home there is left to pay off.

Pretty cool, huh?

Let’s look at Year 1 vs. Year 29 to try and identify some trends:

Notice how during Year 1, much less money per is going to principal than interest compared to Year 29?

That’s because most mortgages are designed to have you pay off a greater share of the interest before paying off principal.

Paying off principal is what helps you build equity, so you will want to take amortization into account when planning to purchase a home and deciding how long you want to stay.

The longer you stay, the higher the monthly percentage of principal you will be paying off.

Pretty cool, huh?

If you are going to be a homeowner, you should have a general understanding of of how much money you spend on a daily basis. Better yet, why not have an ultra-specific understanding? 

Wally helps you record your expenses so that you have a better picture of your daily finances.

Most importantly, it lets you input the money you spend on the spot to keep you accountable. 

It may even help you think twice about spending. You know, since you’re trying to buy a house and all.

Let’s start by downloading the app on iOS or Android.

Enter the app and create an account.

Begin by entering you salary and current balance.

Now get started adding in things you’ve spent money on today!

Select a category, price and location for each item.

Wally is helpful because it can track your location. This makes it easier to take note of a purchase right on the spot.

You can also review your spending on a weekly, monthly or yearly scale.

That’s it! 

Simple but extremely helpful. The most underrated aspect of Wally is that it doesn’t connect to your bank. It makes you input your spending directly as it happens.

It takes a bit of getting used to, but if you can commit to regularly inputting your spending, it can have a very positive impact on the contents of your wallet.

You figured out your credit situation in Tips 1 and 2, but what if you could start optimizing the value of your credit cards? 

You shouldn’t have to go on a spending freeze while preparing to buy a home, but you should be able to maximize the value of the money you do spend.

Wallaby helps you make sure you are earning the best possible rewards from your credit cards.

Wallaby has an app compatible with both Android and Apple phones, as well as a Google Chrome extension, which is extremely helpful.

Start by going to the Wallaby homepage and creating an account.

Once you have an account, Wallaby needs to know which credit cards you have so that it can help you maximize your rewards. 

Luckily, they make it easy for you to provide this information by listing out most major cards.

Select your cards and click on “Dashboard”

Once you get to the Dashboard, you will be prompted to link to your cards so that Wallaby can get a snapshot of your current accounts.

Click on “Continue to Setup Profile once all of your necessary accounts are linked up.

Wallaby will then ask you a few questions about how you prefer to earn points. It will then take this information and give you a custom recommendation of the type of card that would help you achieve your goals most effectively.

Happy with your current credit card(s)? 

Great! The Wallaby Google Chrome extension helps you pick the optimum card to maximize your rewards during online checkout.

Here’s how:

First, let’s get the Chrome Extension.

Let’s start on the browser extension page.

Click on “Install for Chrome” and add the extension to your browser.

When you click on the extension in your browser, you will be prompted to connect the extension to your account.

Enter your email or phone number to connect.

Now let’s put it to work!

Let’s say you want to buy a new bed for your dog. 

When viewing the item in your browser, click on the Wallaby Chrome extension and it will give you recommendations on which card to use for the purchase based on different sets of criteria.

Want to maximize rewards or minimize interest? 

Wallaby will tell you which card to use:

Pretty easy, right? 

Obviously, if you are planning on making a home purchase, you should probably take it easy on the spending. But when you do spend, why not get out of it as much as you can?

What’s the best way to know how much you can afford to spend on a mortgage? Well, having a budget is step 1.

You Need A Budget (YNAB) is a fantastic budgeting program. It makes it incredibly easy through customization options to create an accurate monthly budget and then visualize it. Use YNAB to help you clarify how much home you can afford.

Let’s get started.

First, go to the YNAB website.

It’s up to you whether or not you would like to create an account. They have a pretty sizeable 34 day free trial that doesn’t require you to input any credit card information so you have plenty of time to decide.

Once you’re in, you’ll hit a dashboard that looks like this:

Click on Let’s get started.

Now go to the top of the screen to the “Set a Goal” section as seen below:

Click "Start!"

You will be prompted to add a bank account. 

YNAB can track the money in your account and will make sure you are on track to stay within the budget you are about to create.

Easy enough, right?

Now here comes the fun part:

Ok, well maybe not fun but definitely easy. Start inputting your monthly expenses into this section.

Feel free to add categories if you don’t see everything you need. The dashboard makes it easy to customize your expenses.

Done?

Congratulations! You have a budget!

YNAB recommends popping in every time you get paid to check on the budget and make any necessary adjustments.

Can’t get enough of YNAB?

Their website has some really helpful tools that can help you learn about budgeting quickly based on how much time you have. 

This is a great resource for a budgeting future homeowner.

You that you have created your budget, you are well on your way to being a more confident, more prepared homeowner.

Mint, like YNAB, is an amazing budgeting tool, but it also allows you to set goals, track your investments, and automate savings. 

Let’s take the tool for a spin.

To start, go to the Mint website and create an account.

You will be prompted to link up your bank accounts.

 Go ahead and connect them.

Once you have linked your account, we are ready to set some goals.

Go to the “Goals” tab in the menu. 

You will see the following page:

What a coincidence! “Buy a Home” is one of the goals. 

Let’s click on it.

Fill out the fields in the form that pops up based on the price of the home you are seeking to purchase.

You will then be prompted to either use an existing savings account or create a new one. 

Based on your choice, you will be presented with a screen that shows you how much you will need to save monthly to hit your goal.

Save the goal and it will link up to your budget and provide you with reminders to set the money aside.

Whether you want to buy in 2 months or 2 years, setting goals with Mint is a great strategy.

The mortgage process gives a whole new meaning to the word “document.” Keeping track of everything in a file cabinet sounds a little 1997. 

Leaving loose documents all over the place sounds even worse.

How about you make everything digital? Doxo is the tool that will enable you to do so.

Go to the Doxo website and create a free account.

Once you have created an account and logged in, you will hit the dashboard:

Doxo is a great program in that it also allows you to sync up your email address so that you can pay and store all of your bills in one place.

Feel free to use this great feature, but for today, we’re going to focus on document storage.

Click “Upload” in the top right corner.

Now upload a document.

You will notice that once the document is uploaded, you have the ability to categorize it, add a “to do” action to it or add notes to describe the document.

All of your documents will be visible and you will be able to organize them within the “Filed Documents” tab.

Especially during the mortgage process, the ability to have all of your documents in one place, categorize them and add “to-dos” to them is a massive advantage and will save you more time than you can imagine.

You will thank us later. 

Remember what we said about documents? Well if you don’t want to wear out your scanner at home or at work, why not just use your phone? This app will come in handy.

Start by downloading the Adobe Scan app on iOS or Android.

The rest is pretty simple.

Grab the document you want to scan and put it on a flat surface.

Hold your phone still over the document and it will automatically scan.

The app will then show you the document you scanned.

Push “Save PDF” on the top right:

You can now access your scanned document in the file list.

If you enter the document, you will be able to share it, email it and view it in acrobat.

That’s it! 

Much easier than using your office scanner!

If you're reading this helpful list of tips for advice on your first home purchase, go ahead and skip to the Conclusion. If you already own a home, and the sale of that home will factor into your new home purchase, stick around! 

These next 4 tips are for you!

When potential buyers of your home come to a showing or an open house, it needs to be flawlessly clean.

That sounds pretty intuitive, but many sellers forget to do some of the basics when it comes to cleaning.

Fortunately, there is a guide that will ensure you don’t miss a spot.

Ready to clean? Let’s go!

Start by going to Real Simple’s Ultimate Cleaning Checklist.

You will be presented with the daily no-brainers first:

Followed by the weekly basics:

So far there shouldn’t be any surprises.

But now things get a bit more interesting.

Here’s the monthly list:

Disinfecting doorknobs?

Deodorizing your microwave?

All things that could make a big difference.

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Would you have thought of all this?

Let’s move on to yearly items.

Most of these should be done before having potential buyers in your home:

Pretty simple right? 

Now you’ve earned yourself a break. We’re almost done!

90%? Yes, you read that correctly. In fact, 95% of staged houses sell in 11 days or less, while non-staged houses take around 90 days.

Think of what you could do with those extra 79 days...

Maybe move into a new home? Just a thought.

But you don’t have to pay thousands of dollars to have a professional stager prepare your home.

You can, of course, but so many of these tips are about helping you with your finances in preparing to purchase a home. Why stop now?

Want to stage your home flawlessly on your own?

Here’s what you need to do:

Step 1: De-cutter

• Get rid of all loose items, or put them in storage
• Remember, you love your knickknacks, but not everybody else will appreciate them as much as you do
• Don’t add a decorative item unless you remove more than you bring in

Step 2: Optimize your lighting

• Maximize natural light as much as possible
• Replace all burned out bulbs, ideally with energy-saving LED bulbs
• Ensure that there are three types of lighting in each room:  Ambient, Task, Accent.

Step 3: Don’t be scared to use plants!

• Try an orchid. They're cheap and beautiful and you can find them at most grocery stores.
• Buy flowers for the dining room table and kitchen island
• Follow Tip #16 for advice on outdoor flowers

Step 4: Follow the rule of 3s and 5s

People react more favorably to groupings of 3 or 5 items. If you put candles on your dining room table, try arranging them in groupings of 3 or 5.

Do the same with other items.

Step 5: Use colors people like!

Follow Tip #17 for advice on picking color.

Step 6: Make easy upgrades!

• If your cabinet hardware is outdated, buy new hardware!
• Buy neutral-colored bedding
• Switch out old light fixtures for new, modern ones
• Buy newer, cleaner rugs. You can take these to your new home with you!

Step 7: Optimize room layouts

• Keep furniture away from walls to make your rooms look bigger
• Make sure there are plenty of ways for foot traffic to get through a room
• Think about how people will interact within a room. Group furniture accordingly

Step 8: Clean!

If you skipped Tip #14, now is the time to head back to it. Cleaning isn’t fun, but it is make-or-break when it comes to selling your homes.

Step 9: Don’t underestimate the power of smell!

• Make sure there are no bad smells by deeply cleaning the house (we covered a couple times but just making sure!)
• Put an air freshener in each closet. They tend to get stinky.
• Bake something delicious! People associate the smell of good baking with a positive environment.
• Use a calm, pleasant scent in a central room. Try a reed diffuser or a Glade plugin.

Not too tough, right?

Staging will make a huge difference.

Usually, when thinking about adding value to a home, people think about the inside of the home immediately.

But this is not taking into account the fact that every potential buyer’s first impression will be of the outside of your home!

Here are a couple quick, inexpensive and easy tips for adding value and curb appeal.

1. Buy some flowers.

The Home Depot has some great options and a site that can help you make a decision easily and quickly.

Just pick a color:

And then pick your plants and pick them up in store.

Easy, right? Home Depot will give you the most popular, best selling items first.

Remember not to overthink it. You are more likely to sell a home by decorating it in ways that are universally appreciated.

2. Get new address numbers for the front of your house.

Simple, yes, but it can make a huge difference.

Amazon has a great selection of best-selling number plaques.

Take your pick! This is one of the cheapest and easiest ways to update an exterior.

It seems silly that painting a couple rooms in your house can make such a huge difference, but it has been proven that certain colors help homes sell for an average of $5,000 more.

There’s one problem though:

You worked hard to give your home a personality. You made it the perfect house for you.

Unfortunately, what works for you may not be what is universally more likely to get you a premium for your home. Will it help if you keep in mind that you can use your new home as a blank canvas for your creativity?

Ok, great! 

Benjamin Moore has a great tool for picking paint colors for specific rooms.

Let’s get started on picking some colors.

Go to “Color Collections”

Now remember, we are not going for impact here, we want to make sure we make your home as appealing as possible to a wide audience.

Let’s focus on what’s popular right now.

Click on “See Colors” under “Color Trends 2017.”

Now pick a color you think may be a fit.

Great! Let’s see it in action.

Click on “See In Room.”

You will be presented with a beautiful representation of the color on a living room wall.

The tool will also provide you with popular accent colors to go in the room.

Feel free to play around with colors until you find something you love!

The best part is that these are widely accepted popular colors, so they will add value to your home in the eyes of potential buyers.

$5,000 profit for one or two days of work and a couple gallons of paint? 

Sounds like a pretty good deal.

So there you have it! 17 bite-sized steps you can take today to prepare for homeownership.

Remember, you don’t have to try every single one of these tips. Even picking a couple to implement can make a huge impact on your ability to become a confident, responsible homeowner.

Bookmark this post and try a few tips a day until you feel ready.

If you need more great tips, resources and advice, check out The Definitive First-Time Homebuyer’s Mortgage Resource Guide.

We can’t wait to hear your success stories!