The sooner you begin preparing to make the big purchase, the better off you will be. Some of the things below should happen many months ahead of your first open house, so read below for the four most important activities you need to know about before you buy your first home.
1. Set Your Savings Goal
The higher your aspirations for a home, the more money you will need. Having money automatically set aside from your check before you even get it is an excellent and painless way to ensure that you have the cash needed to complete your home purchase. Be prepared to spend a good part of your savings for a down payment. While some government-backed home loans can be had for very low or no down payment, most conventional lenders want to see the traditional 20% or so of the purchase price ahead of time. Consider these needs as well:
- Professional home inspection
- Professional home appraisal
- Closing costs
- Moving costs
2. Become Aware of Your Score
Your credit score will play a huge part in your lending approval as well as the interest rate you end up paying. Some issues and mistakes on credit reports that negatively affect your score can be corrected, but it might take time to have them removed. Begin at least several months ahead of time to correct mistakes. If you have negative issues like high credit utilization, that can be corrected in a few months by paying down the balances on credit cards and other loans.
3. What Would a Lender Do?
Next, address your budget, because your debt-to-income ratio will be one of the prime factors considered during the mortgage underwriting process. Pay off as many debts as possible so that you can show that you can pay all the expected expenses of owning a home when the time comes. That means a budget that includes your mortgage, homeowner's insurance, property taxes, any mortgage insurance, and the rest of your obligations like student and auto loans.
4. Talk to a Real Estate Agent
The sooner you begin to learn about the market in your preferred location, the sooner you can be prepared to deal with it. If you love the same neighborhood that everyone else does, your agent can provide you with some tips to get a jump on other buyers and score the home of your dreams. Once your lender provides you with a range of potential prices, your agent can begin to assemble a list of homes for you to consider.
Reach out to businesses like the Matthew Barry & Erin Willman Real Estate Group - RE/MAX Professionals to learn more about any of the above and more.