The Newlyweds’ Guide to the First Home

This much is clear: You both see yourself starting married life in your own home. But how you’ll pay for it? Well, that’s hazy. Here’s a simple checklist to clear the financial fog. It should not only help you reach the American dream, but better overall money management, too: Take a Look at Each Other Lots of couples are afraid to be intimate, at least when it comes to revealing their financial lives, observes Gerri Detweiler, personal finance expert at Credit.com. However, unless you start sharing income and debt information, issues could surface when you’re on the verge of buying a home that could derail the process, warns Cate Williams, vice president of financial literacy for Money Management International. A good place to start revealing your financial selves is with a visit to annualcreditreport.com. This site, explains Detweiler, was established after federal law mandated that the three major credit-reporting bureaus (Experian, Equifax and TransUnion) provide one free copy of your report each year. “Get reports from all three bureaus,” she advises. For one thing, if there are errors start the process of rectifying mistakes [described in the reports] so that the wrong data doesn’t unfairly jeopardize you in qualifying for a mortgage. Once you’ve examined each other’s debt histories - talk about income - not just what you’re earning now, but what you see ahead. Get a Professional Opinion You’ve assessed what you owe and what you earn. Now, you probably have a hunch about whether you can afford a certain size mortgage and monthly payment. But lending firms have specific rules, like how much overall debt you can take in relation to your income. Most lenders offer a “prequalification,” a service that’s usually free and puts you under no obligation to actually take a loan. “With pre-qualification, sooner is always better,” shares Dru Bergman, executive director of the nonprofit DuPage Homeownership Center, Wheaton, Ill. “That way, people know where they stand and if they have to do some work to improve [their finances],” she notes. Let Your Dream Inspire Good Habits Especially under today’s conservative lending standards, many couples will learn from prequalification that they need to work on financial issues, such as accumulating savings or improving credit, adds Williams. Although you may be impatient, consider this period a valuable time to lay down good habits such as prompt bill paying and budgeting, Detweiler advises. To save, you’ll both have to follow a budget, which will “take finding common ground on spending attitudes,” Williams says. Some couples never learn such spending compatibility — a major source of marital strife, she adds. Keep Your Financial Health Strong Buying a home, notes Detweiler, is the impetus for many couples to examine their entire financial life. You’ll want to keep emergency savings on hand, she explains, since lack of funds to pay unanticipated bills is what has caused so many homeowners trouble lately. And, since you’ve saved from a down payment, you’ll want to put your thrifty skills to work funding some retirement savings. Finally, you will be required to buy homeowner insurance, and can start to contemplate other insurance needs, such as a life policy. Then, your home will bring you comfort - and financial security.