Are you thinking about buying a home? Whether it’s your first time, you’re targeting your dream home, or downsizing for retirement, purchasing a home can be a fast-moving and overwhelming process. However, it’s one that’s critical you get right, with hundreds of thousands of dollars (and your daily living conditions!) on the line.
The good news is that process of buying a home doesn’t start when you start touring properties and writing up offers. In fact, there are a few essential steps to prepare correctly for your home buying journey – including talking to me to get a loan preapproval. With a little foresight, work, and organization, we’ll make sure that your hunt for the perfect home will be smoother, more enjoyable – and more lucrative. Here are 7 ways to prepare before buying a home:
1 . Budget and save
A great place to start preparing for a home purchase is taking a hard look at your budget and bank account. By tracking expenses and setting a realistic budget, you’ll be able to what kind of house payment might be realistic. Additionally, studies reveal that the number one reason people DON’T purchase a house is because they can’t afford the down payment.
The good news is that there are loan products that allow you to buy without coming up with the 20% down payment, which used to be the standard in the past. Even 3% to 10% of a home value can add up to a sizable amount, not to mention other closing costs and fees. So by sharpening the pencil on your budget and coming up with a plan to save money every month, you’ll have a realistic plan to start amassing your down payment and establish a timeframe.
Of course, if you are counting on the proceeds from the sale of your current home to buy your next residence, your first step after talking with me might be to sit down with a real estate agent so they can examine what your home might sell for and how much profit you’d net.
- Look up (and maybe repair) your credit score
Unless you’re paying for your next home with cash, you’ll have to apply for a mortgage loan to fund your home purchase, and there’s no number more important to the bank or lender than your credit score (as well as your monthly income.) In fact, the best way to ensure you get a fantastic low-interest rate on your mortgage (and therefore a low monthly payment) is by maintaining an excellent credit score.
Even the difference between a 670 FICO and a 730 FICO could potentially save you (or cost you!) tens of thousands of dollars over the life of your loan. So I recommend you come talk to me to get a copy of your credit report six to nine months before you plan to buy a house and apply for that loan.
Remember that even if you pay everything on time and think you have a good score, almost one-third of all credit reports contain errors like incorrect or outdated information that can lower your score, and identity theft stings up to 1 in 8 people in the U.S. in any given year. Since you’re taking a look at your credit well ahead of time, you’ll catch those snafus early and still have time to repair your credit with my help or a reputable credit repair agency.
- Sit down with me to get a mortgage preapproval
Instead of trying to guess how much house you can afford, what your payments might be, and determine your credit score, you’ll probably want to sit down with me first. As a mortgage broker, I can run your credit to see your score and also how much monthly debt you hold, as well as tell you what documentation you need to get together like bank statements, tax returns, pay stubs, etc.
Armed with all of that accurate information, we can preapprove you for a mortgage. This will include accurate estimates of how much home you can afford based on debt to income ratio, what your interest rate might be, estimated closing costs and down payment, and the ever-important monthly payments. Of course, this information may change slightly by the time you find you a home and get in contract, but after sitting down with us to get your loan application started, you’ll be well on your way.
- Sell your home first?
If you’re a first-time homebuyer or will be moving from a property you’re renting, then you have a relatively easy path to buying a new home. But for those who own their current home, they should look at the process of listing their home early in the game. A good Realtor can easily give you a detailed analysis of what your home might be expected to sell for in today’s market, and also a rundown of what profit you might net after all fees and payouts. Knowing this bottom line will probably make a big difference how they start taking on the prospect of buying – and how I can best structure your purchase loan.
- Map out a home buying strategy
Will you be writing contingent offers? How comfortable are you with repairs to potential homes? What dates and times can you commit to going to search for homes? How can I write a fantastic lender letter to improve your prospects of getting an offer accepted? Ideally, when would you like to find and close on your new address? As part of your team, we can sit down with you and your Realtor to plan a solid home buying strategy, so there are no surprises, confusion, or ill preparation once your search begins!
- Start narrowing down neighborhoods
I’m sure you’ve heard the old real estate mantra, “location, location, location” – and it still stands true today. The single best way you can ensure you make a wise investment when buying a home is by choosing a good quality neighborhood, but too many people fall for the fools gold of purchasing an aesthetically pleasing home in a marginal neighborhood.
Remember that you can fix up and improve your home, but there’s little or nothing you can do about your neighborhood.
So start by narrowing down what characteristics and amenities you are looking for in a neighborhood like good school systems, parks, bike trails and recreation areas, commute times, traffic flow, crime rates, and proposed growth, and of course tracking the trend of home values in those neighborhoods. With all of that data at your disposal and a list of priorities, you’ll be empowered to make a great decision when it comes time to go out looking at homes for sale.
- Draft a wish list for your perfect home
You’ve finally come to the fun part – going out and actually viewing homes for sale! With all of the preparation and hard work we’ve put in, you’re preapproved for a mortgage loan, know your price range for homes, and which neighborhoods fit your needs.
But before you jump into your Realtor’s car on a Saturday morning or one evening after work and start touring homes for sale, you’ll want to write up a wish list for your perfect house. How many bedrooms are ideal? Bathrooms? Do you want an open floor plan with a great room kitchen and living area? Is a single story home preferable, or are two stories ok? How about a swimming pool?
Now that you have your wish list for the ideal home make another list, but this one with what you need in a home – not just what you want. Prioritize these needs from 1-10 (for instance, you’ll need at least four bedrooms if you have a big family, etc.) so your Realtor can work to find the right home that offers the amenities that are most important to you.
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Let’s get started with your mortgage loan – and happy house hunting!