Are you ready to buy a house, but not sure exactly how to go about the process? Here, Realtor.com offers a handy checklist on how to prepare to buy a home.
1. Boost your credit score
Your credit or FICO score—which reflects how dependable you are at paying bills—directly affects the interest rate on your mortgage and the amount of your monthly payments. Most lenders require a minimum score of 620 for a mortgage (the U.S. average is 687), so you’ll want to do everything to lift your number before applying for a mortgage. Factors that can drag down the score include carrying excess debt, missing bill payments or applying for too much credit. So can mistakes. If you find items on your credit history that you think are incorrect, immediately begin working with someone to mitigate these issues and contact all three of the largest credit-reporting agencies (Equifax, Experian and TransUnion).
2. Save, save, save
A home likely will be the biggest purchase you’ll ever make, and it’s a good idea to have a decent financial cushion for everything from a down payment to closing costs. Save money any way you can and, whatever you do, don’t buy things you can’t afford. Put off any big purchases or anything with a recurring payment—such as a new car—until after you buy a house.
3. Figure out your budget
Think carefully about your entire budget—from student loans to groceries to your monthly Netflix subscription—when considering buying a home. Not only will you be responsible for a mortgage payment, but you’ll also have to pay for homeowner’s insurance, repairs and upkeep, as well as real estate taxes. Add up every last expense to determine what maximum monthly output you can swing without stress.
4. Find a good lender
You need to know exactly how much purchasing power you have to determine the top home price you can afford. To figure that out, you’ll need to find a mortgage broker. Take the time to interview three or four lenders. Talk to both local banks and credit unions, as well as national financial institutions. The interest rate shouldn’t be the only criteria when it comes to choosing a mortgage provider. Also ask about fees, other services that are included and ongoing customer service, and then choose a lender that makes you feel comfortable, answers your questions and takes time to educate you on the process of getting financially ready to purchase a home. This may include paying off debt, establishing a work history and gathering documents.
5. Get pre-approved
After you choose a lender, make sure you get pre-approved, not just pre-qualified—that’s a big difference that could mean an offer being accepted or not. Being pre-qualified means you’ve only discussed your finances with a broker, and no one has actually reviewed your financials. Pre-approval means your mortgage broker knows concretely you can afford a home based on the financials you’ve provided.
6. Scout neighborhoods
Look at properties in top resale areas with good schools, parks and transportation. Also, make sure to drive around the areas in the evenings and weekends to get a complete picture of what the neighborhood is like. Once you’ve identified an area where you’d like to buy, get to know the local real estate market. Search online for homes in the area to see if the asking prices are within your price range.
7. Work with a great Realtor
The next step is to find a licensed Realtor. Ask friends and relatives to recommend people they have worked with previously, or research agents online. Meet with a few until you find someone who really understands what you’re seeking. The real estate professional you pick should understand what homes will fit with your budget, lifestyle and priorities.
8. Start looking at homes
Now it’s time to let the fun begin by actually getting out and looking at potential homes. In addition to looking online, go to as many open houses as possible. When you see something you like, ask your agent to help you find comparable houses in the area to help determine if the home is priced appropriately.
