Of course owning a home is your dream, but before you call a realtor, before you start reading house for sales ads, before you visit with your banker start by getting your house in order.

Develop a monthly budget.

Like too many of us, you’ve probably been winging it. That’s why this is one of the most important and easy things to do. Start with your current take-home income and subtract your real non-housing expenses. The number that’s left is what you can actually afford to pay for a housing. Don’t get ahead of yourself and let someone else tell you, you can afford more. Taking this step will help you avoid financial hardships later.

As a general rule, you shouldn’t plan to spend more than 30% of your income on housing.

Start saving money.

Even with creative financing, buying a home is going to require cash out of your pocket. Your down payment amount will depend on the type of loan you get, but there will also be closing costs, and of course cost of moving and getting setup in your new home.

Check your credit report.

Your credit report – you have three of them – are a record of how you’ve paid and borrowed money. You can get one free credit report per year. If your goal really is to buy a home, you should probably get your free report each year from all three reporting agencies, because the reports typically vary to some degree. You can get your report at annualcreditreport.com. What you’re looking for is incorrect information. Use this time ahead of entering the housing market to get incorrect information off your credit report.

The three credit reporting companies are TransUnion, Equifax and Experian. Getting a copy of your credit report outside the free allowance should cost $20.

Check your credit score.

The credit agencies above, take your credit information in your credit report and translate it into a three digit number that reflects the quality of your credit history. Mortgage lenders will use these scores to see determine if you qualify for a loan. If your number isn’t very high, below 600, start taking steps to improve it. (More on improving your credit in “Home Sweet Home.”)

Gain knowledge about your local housing market.

Before you head out house shopping, grow your knowledge about your local housing market. What is a reasonable cost for the size home you’re looking for? If you’re up for it, explore your options for a condo versus a stand-a-lone house. Look into typical property tax rates. Find out how fast properties are moving. There’s a saying, “You’re too dumb, to know what you don’t know.” After you gain some knowledge, you should be prepared to ask the questions that professionals on your team – your realtor, banker, title company, insurance agents, etc. — can help you with.

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