Homeownership is back on the rise, and you might be thinking about putting down some roots and taking on a mortgage. It can be a daunting task, but following a few simple steps can help put you in the best position to be successful with your home purchase.
First, check into your credit score. Along with your income, your debt and your assets, this is one of the primary factors determining how much money you will be able to get from the bank. This is essentially a rating of how good you are at paying your bills, so you’ll want to shore it up after getting a report. Even a small problem like an old, unpaid traffic ticket can reduce the credit score and can easily be taken care of. It’s best to tackle this problem several months before you start seriously looking to buy a home.
Do a home finance audit. A home is a major commitment. Along with the actual mortgage come insurance, property taxes and any home repairs. You can’t just call a landlord in the middle of the night to fix a problem; you’ll be responsible. One easy way to do this is assiduously to track all of your income and expenses for two weeks, including small things like an extra coffee and even your tips. This will let you know if there is any wiggle room in your finances where you can cut back to increase savings or make payments on a house. If you are already at the edge of your spending range, you may need to cut your spending or increase your income in order to afford a home. Buying a home you can’t actually afford will leave you stressed out each month and may lead to things like missing payments or even foreclosure in the long run. If you’re not prepared, it may be best to wait.
Do your research. There are a lot of things you’ll have to research in order to be an informed buyer. First, you’ll need to build a team of trusted people to help you with your home purchase. This includes a real estate agent, a mortgage broker or lender, and a home inspector. In addition to researching your team, you’ll want to do a lot of research on the market. Individual home markets differ, and knowing what the trends are in your market can give you the tools to make an advantageous offer. You’ll also want to research neighborhoods. Things like schools, access to public transportation, crime rates and resale value in homes can make a big difference in your quality of life and in your long-term investment.
Finally, get pre-approved for a loan. A pre-approval—which is different than a pre-qualification—is a guarantee from a lender that you will be able to acquire a loan in that amount. This is key with sellers, particularly those who are choosing from multiple offers. It provides them with assurance that your deal won’t fall through.
A home is the biggest purchase most people make in their life. As such, it deserves extra time, attention and research to make sure that you make the right decision. If you do the right kind of work beforehand, once you get your keys you’ll have nothing to worry about.
By Sam Erickson via MultiAd
