Is it finally time to buy a home of your own? Your heart may say “yes” but before you take the plunge, there are a few things you’ll want to be sure are in order.
Diving into the process with no experience may seem daunting but, it doesn’t need to be. Here’s our step-by-step checklist for rookie real estate purchasers:
Check your credit score
First things, first! Check your credit score before you do anything else. It is important to know your score because this is what mortgage lenders look at to determine how “credit worthy” you are. A higher credit score will yield you a lower interest rate, meaning you’ll pay less monthly. You should also closely look at your credit report to ensure the information provided is correct. Mistakes do happen, but can easily be fixed by contacting the appropriate credit bureau.
Determine what you can afford
It will be vital to decide exactly how much you can afford, in terms of your monthly mortgage payment. Factors that will be taken into consideration is your household income, the size of your down payment, current interest rates and the type of loan you select. Browse online and test out various mortgage calculators to get a sense of what you may be able to afford.
Secure mortgage pre-approval
While online mortgage calculators are great for approximations, nothing beats meeting with a qualified lender. This person will get you pre-approved and confirm the mortgage amount you can afford. Lenders offer a variety of rates and programs, so be sure to weigh your options for what is best for you. In the current market, a mortgage pre-approval is a necessity. It tells the seller you are serious and have already been approved for the loan.
You may have already begun doing so, but continue to save! Ideally, you’d have a 20% down payment, in order to receive the most competitive mortgage rate. There are lots of creative ways to save for a down payment. However, many first-time buyers opt to put down less than 20%. In 2017, the average down payment in the US was 11%.
As you move closer to purchasing a home, it’s important to put all major financial changes on the back burner. It’s not the time to apply for a new credit card, switch jobs, buy a car, furniture or make any other pricey purchases. All of these things have the possibility of negatively effecting your credit score, which in turn could make you miss out on a home.
Select a real estate agent
There’s currently a limited number of homes on the market. That means that enlisting help from a real estate agent is more important than ever. These individuals are well versed in home inventory, ideal locations and can make the entire process more smooth than going it alone. Check with family and friends for agent referrals.
Make a home wish list
What do you want in a home? It’s likely easy to get carried away, but focus on nonnegotiable factors, such as a specific school district, number of bedrooms or bathrooms, a basement or fenced in yard. Once those elements are determined, consider other less important features, like a swimming pool or home office. Be realistic with the difference between a “want” and a “need” while keeping your pre-approved mortgage figure in mind.
Attend open houses
While we encourage browsing for homes online, there’s nothing quite like seeing a property in-person. Open houses are a way to view multiple homes in one day, in a low-stress environment. Be sure to take plenty of photos and notes so the available homes don’t all run together.
Location is crucial! You aren’t just purchasing a home, you are buying into the entire neighborhood. Plan on visiting the area at various times of day and night and speak to neighbors in order to determine if the community seems right for you.
Buying a home isn’t an impulse purchase. If you are willing to put in effort before you make the first offer, you’ll set yourself up for home buying success!