Assessing Your Financial Health Before diving into the home buying process, it’s crucial to take a hard look at your financial situation. This assessment will help you understand what you can afford and identify any areas that might need improvement before you apply for a mortgage. Start by obtaining your credit report from the three major credit bureaus—Equifax, Experian, and TransUnion. Your credit score plays a significant role in determining the interest rate on your mortgage; the higher your score, the lower your interest rate is likely to be. Examine your credit report for any inaccuracies or outstanding debts that could negatively impact your score. If you find issues, address them promptly by disputing inaccuracies with the credit bureaus and working on paying down high-interest debts. Next, evaluate your income, savings, and existing debt. Lenders typically use the 28/36 rule, which means your mortgage payment should not exceed 28% of your gross monthly income, and your total debt payments should not exceed 36%. Use these benchmarks to determine how much home you can afford without overextending yourself financially. Determining Your Budget To accurately determine your budget, consider both the upfront costs of buying a home, such as the down payment and closing costs, and the ongoing expenses, including mortgage payments, property taxes, homeowners insurance, and maintenance. A common recommendation is to save at least 20% of the home’s purchase price for a down payment to avoid paying private mortgage insurance (PMI). However, there are loan programs available that require lower down payments if saving 20% is not feasible for you. Use online mortgage calculators to estimate your monthly mortgage payments based on different down payment amounts, interest rates, and loan …