The new year is almost here. Is buying a new home on your list of resolutions for 2012? If it is, then you need to make sure your financial situation is order. By following these tips, you can make your dream a reality.

1. Improve Your Credit Score

In order to determine whether you qualify for a mortgage, banks or lending companies will check your credit score to determine how much of a risk you are in repaying the money they loan you. The higher your credit score, the more trustworthy they’ll view you. A low score may keep you from getting a loan or the best interest rate. Therefore, check your credit reports with Experian, Equifax and TransUnion to make sure the information contained on them is correct. Get any inaccurate information corrected. It can take 2 to 3 months to resolve any discrepancies. If your credit score is low, you’ll need to make an ongoing effort to improve it by paying down debt, paying your bills on time, keeping your credit card balances low, and not opening new lines of credit. Over time by managing your credit responsibly, you can improve your score.

2. Determine What You Can Afford

Use one of the many online calculators to determine how much you can afford for a home, or contact a reputable mortgage broker to discuss your financial situation. Generally, you can afford a home that costs about 2-1/2 times your gross annual salary. However, if you have other financial obligations, like credit card debt, alimony or child support, you may need to settle for a less expensive home. Also, the size of your down payment will determine what you can afford, too.

3. Save Money for a Down Payment and Closing Costs

Generally, lenders want at least 20 percent of the home’s purchase price as a down payment. If you can pay more, you may qualify for a larger loan. If you don’t have the money, you may still qualify for a low-down payment mortgage (as little as 3 percent of the home’s cost) through a variety of public and private lenders. Plus you’ll need to pay for private mortgage insurance which adds about 0.5 percent of the total loan amount to your mortgage payments for the year. You also need to ensure you have enough money saved to pay for closing costs and other fees for the appraisal, title search, inspection, and attorney.

4. Consider All Costs of Home Ownership

Besides your monthly house payment, make sure you can afford all the other costs associated with home ownership, such as property taxes, homeowners’ insurance, homeowners’ association fees, utilities, maintenance and repairs, and home improvements.

5. Build Up Your Bank Account

In addition to saving money for the down payment, closing costs and other fees of home ownership, you should have at least 3 to 5 months’ worth of mortgage payments saved. Your lender will want assurance that you’re a good loan candidate who’s not living from paycheck to paycheck.

By taking a good look at your financial situation and doing what you can to make changes to improve your credit history and save money, you can improve your chances of qualifying for a mortgage and buying a new home in 2012.