Thinking of Buying a Home? 6 Ways to Prepare!

    6 Ways to Prepare for Buying

    If you’re thinking of buying a home, it’s time to do a little bit of homework. It’s not uncommon for new house buyers to have questions about the qualifications for buying a new home – what to prepare for, and what their “new house” budget should really look like. While this process may take some time and thought, the work you put into preparing for that purchase will pay off in the long run!

    Here are some recommended ways to get ready to go house-hunting!


    Get Cozy with your Credit Report

    One of the first things a mortgage company will look at is your credit report. When did you last check yours? You’ll want to get a copy, and make sure it’s accurate – is your report still showing old, paid, or settled debts? Is there anything on there you could pay off to clean it up a bit? Taking some time to get your credit report polished up will pay off when it’s time to talk about a mortgage. If possible, stop applying for credit for the 12 months leading up to your loan application, and don’t apply for any additional credit until after you’ve closed on your home. In general, the higher your credit score, the lower your monthly payments – so the hassle is almost always worth it.


    Decide How Much Home you can Afford

    All buyers want their home to be financially comfortable – but what, exactly, does that look like? In general, you don’t want your home expenses to be more than 28% of your monthly income. This should take into account the loan payment, taxes, insurance, etc. Before you begin house hunting, take your new budget for a spin. Calculate the mortgage payment for the home in your intended price range, along with any related increases in expenses (insurance, utilities, etc), then begin banking the difference between your “house budget” and your current expenses. Not only does this help you build up some savings (hello, down payment), but if the budget is too tight, you’ll know it now and be able to adjust to a more comfortable amount.


    Prepare for the Down Payment and Closing Costs

    Depending on what your credit and financing look like, you’ll usually need to have a down payment of some sort when you close on your new home. This amount varies – but usually falls in the range of 3% to 20% of the purchase price. You’ll also need to be prepared for paying any necessary closing costs – your loan officer can help you estimate these based on your target purchase price of a home. Start saving as soon as possible for these “cash” expenses, as you’ll be expected to pay these at closing.


    Begin Saving Now

    Above and beyond saving for the down payment and closing costs, it’s a great idea to begin building your savings. This helps with getting a mortgage, as your lender will want to see that you’re not living paycheck-to-paycheck, and you’re a much better loan candidate if you have a “nest egg” that totals 3-5 months of mortgage payments. This also works in your favor once you close on your new home – if there are any maintenance and repair issues that come up, you’ll be prepared! In an average year, you can expect house upkeep to cost about 3% of your home’s value, so saving for that now will definitely help you to avoid headaches later.


    Mortgage Pre-Approval

    When you’re ready to buy a new home, the first thing you’ll need to do is to get pre-approved for a mortgage. This means you’ll have financing already in place, and since the pre-approval process can be thorough and extensive, having this ready to go before you start looking at houses will save you time and problems when you’re ready to make an offer.


    Choose a Home that Makes You Happy

    If you’re going to invest the time, energy, and up-front money into a home, you want one that will work for you (and your family) for the next few years. Today’s market doesn’t guarantee you a quick sale, and depending on how much of a down payment you had, and how much it would cost to sell and relocate, short-term ownership can be an expensive adventure. So before you put in that offer, be sure that you like the house, and that it works for you today – as well as for what you envision your needs to be in several years (as you have kids, or your kids grow up, or you add pets, etc).

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