Prospective Homebuyers: Expert Strategies for Financial Preparation
As the housing market continues to evolve, prospective homebuyers are seeking ways to prepare themselves financially for one of life’s biggest investments. Financial planner Jovan Johnson recently shared his plan to purchase a home in 2025, emphasizing the importance of proactive financial preparation.
Johnson’s strategy focuses on five key areas that homebuyers can control: building credit, saving for a down payment and closing costs, staying within budget, beefing up emergency savings, and considering professional financial advice.
Building a strong credit score is crucial for mortgage approval and securing better interest rates. Johnson advises monitoring credit scores quarterly through the three major credit bureaus – Experian, TransUnion, and Equifax. He also recommends paying off credit card balances in full each month and freezing credit to prevent unauthorized inquiries.
Saving for a down payment and closing costs is another critical step. Johnson suggests keeping these funds in a high-yield savings account (HYSA) for liquidity and competitive interest rates. He recommends automating monthly transfers and directing extra funds, such as credit card rewards and tax refunds, to the HYSA.
Staying within budget is essential to avoid becoming “house-poor.” Johnson advises setting a housing budget cap, keeping total housing costs to no more than 35% of take-home pay. This budget should include all housing-related expenses, such as principal, interest, property taxes, homeowners insurance, HOA fees, and utilities.
Building a robust emergency fund is crucial for maintaining financial security as a homeowner. Johnson recommends saving at least six months of essential expenses in a dedicated account before closing on a home. Automating contributions to this fund and reducing discretionary spending can help prioritize this savings goal.
Finally, Johnson suggests considering professional financial advice. He recommends using SmartAsset’s free tool to find fiduciary financial advisors who are vetted and held to a standard of acting in their client’s best interests.
By focusing on these controllable factors, prospective homebuyers can better position themselves for success in their home-buying journey, regardless of market conditions.
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