“No surprises” is the mantra I highly recommend for any two people wanting to buy a home together. It may be your next home after outgrowing the one you’re in. It might be your first home now that you’re newly married. Maybe you’re just trying out this couple thing and are willing to share an asset. Regardless, when it comes to getting a mortgage, here are 4 things that even married couples are sometimes surprised about – when it’s almost too late.
Talking Money Makes You Vulnerable
If you aren’t sure your finances are in a good place, it’s better to talk with your partner sooner than later. If you don’t, your mortgage banker will unveil nasty surprises when they run each of your credit reports. Or you’ll waste time looking at 40 different homes, fighting over what you really want versus what you can actually afford. These 4 tips reduce conflict, save a ton of time, and ensure open communication in a marriage you hope will last.
How Much Cash Do You Have for a Down Payment?
Couples don’t often check in regularly over their financial situation. Finding out that you’ve basically spent your wedding gift fund is never good. There goes $30,000 out the window on weekend dinners, a small trip, and clothing. Running down an early inheritance because you haven’t managed your spending as a team is another not-so-fun surprise. It means a smaller home, a home further away from work, or one with fewer amenities. And you’ll live in this home every single day. Were those dinners out worth it?
Talk early. Plan to save each month. If you have money, put it into an account you can’t get to. Be clear on what you have as a team, or what you want to have. Make going into that fund “forbidden” rather than a “backup” when you run out of cash for the month.
Credit Scores & Reports
You’ve been living in your first home. It’s time to move for a new job. For years you’ve talked back and forth about paying this credit card or that, finding money for a vacation. But you’ve never really assessed your situation fully, as a team. You find a great home, apply for a mortgage, and are refused. You’ve been so busy that bill payments were late, credit cards weren’t paid off, and debt grew a bit. The day of reckoning has come.
Sometimes, we are so focused on pouring money into the bucket – working hard, earning raises, that we forget we also have to keep money in the bucket. That means coordinating overall spending together, bill payments together, and savings together. If you haven’t been doing this, check your credit scores and reports before you go shopping for a new home. Rectify any errors and try to improve your credit score quickly.
What Does Your Ideal Home Look Like?
Life would be easy if we could win the HGTV dream home, or the penthouse of the most coveted building. Then there’s reality. The more homes we look at, the more we are tempted to add to our list of “needs”. And don’t forget, mortgage bankers will OK you for the maximum debt load possible, because a bigger mortgage makes their company more profitable.
Instead, be smart. Make a list with your partner and prioritize. Disagree about 2 or 3 things? Make them all the same priority. Do some quick shopping online or in realtor windows to help you. Go to a few open houses and decide what is really important – and see what you can afford in your price range. Come up with a vision together and share it with your realtor. Stick to your price range.
What is Your Debt Load?
How much debt do you have together? You may have a GREAT credit score, but too much debt. This includes credit cards, car loans, student loans, overdraft lines of credit, etc. Being able to afford the home you want includes not only the down payment, but monthly principal + interest + taxes + insurance. If you haven’t talked about that secret debt, your mortgage broker will find it. Best to come clean and figure out how much you can afford as a couple before you start looking. Or simply wait a year and work down that debt.
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