How to Prep Your Finances for Buying a Home—Even If You're a Year Away

Smart Steps to Get Mortgage-Ready, Even if You’re Just Starting to Plan

Buying a home is one of the biggest financial decisions most people will ever make — and it’s not one you want to rush. While it’s easy to focus on browsing listings or visiting open houses, the truth is: the real preparation starts long before you ever set foot in a home.

Whether you're aiming to buy in 12 months or just beginning to think about homeownership, now is the perfect time to get your finances in order. The steps you take today can directly impact your mortgage options, your monthly payments and even the types of homes you’ll be able to afford later on.

This guide walks you through the essential strategies to build a strong financial foundation for homebuying — even if you're still a year (or more) away.

1. Understand What Lenders Are Looking For

Before you can qualify for a mortgage, it helps to understand how lenders evaluate your financial picture. While loan programs vary, most lenders consider a few key factors:

  • Credit Score – Higher scores lead to better interest rates and loan terms.

  • Debt-to-Income Ratio (DTI) – A lower ratio means less of your income goes toward debt payments.

  • Income and Employment History – Lenders like to see consistent, reliable income.

  • Assets and Reserves – Savings show lenders that you're prepared for upfront and ongoing costs.

  • Down Payment – The amount you put down affects your loan size and monthly payment.

Understanding these criteria helps you focus your efforts and make improvements where they matter most.

2. Build (and Protect) Your Credit Score

Your credit score plays a major role in your ability to get approved and what kind of interest rate you’ll qualify for. Improving your score over the next 6–12 months can lead to thousands of dollars in savings over the life of your loan.

Here’s how to get started:

  • Review your credit reports from all three bureaus (Experian, TransUnion, Equifax) for errors and dispute anything inaccurate.

  • Pay all bills on time — your payment history is the most important factor in your score.

  • Keep credit card balances low — ideally under 30% of your available credit.

  • Limit new credit inquiries, which can temporarily reduce your score.

The key is consistency. Even small, steady changes can improve your score dramatically over time.

3. Start Saving for Your Down Payment and Closing Costs

Saving for a home doesn’t happen overnight — but with a year or more of lead time, you can make real progress. While some loan programs allow down payments as low as 3%, most buyers aim to put down between 5% and 20% of the home’s price.

Also budget for closing costs, which typically add another 2%–5%.

Tips to grow your savings:

  • Open a separate savings account specifically for your home fund.

  • Automate monthly transfers so saving becomes a habit.

  • Track your spending and redirect non-essential expenses into savings.

  • Research down payment assistance programs in your state or city.

Starting early helps reduce stress later — and gives you more flexibility when it’s time to make an offer.

4. Pay Down Existing Debt

Lenders use your debt-to-income ratio (DTI) to determine how much of your income goes toward debt payments. The lower your DTI, the more loan options you'll have — and the more attractive you’ll look to lenders.

Steps to lower your DTI:

  • Tackle high-interest debt first, especially credit cards.

  • Avoid new large purchases, like cars or financed electronics.

  • Consider debt consolidation if it helps simplify payments and lower interest.

  • Keep student loans in check by exploring refinancing or income-based repayment plans.

Not only does this improve your borrowing power — it also helps ensure your future mortgage fits comfortably within your budget.

5. Explore Loan Options Early

Not all mortgages are created equal. The right loan type depends on your credit, down payment, income, and long-term plans. Learn the basics now so you can confidently compare options later.

Common mortgage types include:

  • Conventional Loans – Require stronger credit and larger down payments, but offer competitive rates.

  • FHA Loans – Great for buyers with lower credit scores or limited down payments.

  • VA Loans – Available to eligible veterans with no down payment required.

  • USDA Loans – Designed for rural areas with 100% financing options.

As you approach your target buying window, speak to a few lenders or brokers to get pre-qualified and understand your choices.

6. Stay Organized With Financial Documents

When you apply for a mortgage, your lender will need documentation to verify your income, assets, and debt. Start organizing now to make the process easier down the road.

Typical documents include:

  • W-2s and tax returns from the past two years

  • Recent pay stubs

  • Bank statements and retirement account balances

  • Documentation of other income, like bonuses, freelance work, or alimony

  • List of monthly debts (credit cards, car loans, student loans)

Being prepared will help streamline your pre-approval and make you a more competitive buyer.

7. Keep Your Financial Picture Stable

In the final months leading up to applying for a mortgage, financial stability becomes more important than ever. Big changes or red flags — like opening new accounts, job hopping, or large cash transfers — can throw a wrench into your approval.

To stay mortgage-ready:

  • Don’t make large purchases that affect your savings or credit.

  • Avoid switching jobs unless it’s necessary or significantly improves your income.

  • Maintain low credit utilization and keep paying bills on time.

  • Track large deposits or money transfers, as lenders will ask for explanations.

The goal is to keep your financial profile consistent and clean as you head into the application process.

Laying the Financial Groundwork Now Pays Off Later

Smart Planning Today Sets You Up for Success Tomorrow. You don’t have to wait until you’re actively shopping for homes to take control of your financial future. In fact, preparing a year—or even just six months—in advance gives you a huge advantage in today’s competitive market.

By focusing on improving your credit, reducing debt, growing your savings and learning about loan options, you’re not just checking boxes. You’re building financial confidence and setting yourself up for long-term success.

Start early. Stay intentional. And when the time comes to buy, you won’t just be ready — you’ll be in control.

Stephen Husted