Think you’re ready to buy a house? This will likely be one of the biggest transactions of your life. Have you done your homework? Are you familiar with the various mortgage options that are available?
If you think you’re ready to buy a home, you won’t be jumping in your car with your checkbook in hand ready to put a down payment on the first house you like. There are lots of things you need to do before shopping for a home. Keep in mind the following “must-dos” if you think you’re ready. They can come in handy throughout the process of buying.
Preparing to Buy a Home
- Checklist – Whether or not you’re a first-time home purchaser, having a checklist is important. It should outline the kind or style of home you want, square footage, neighborhood, number of bedrooms, and other important things. Having a clear, written list of house needs and wants will serve as your guide during the house-hunting process.
- Strengthen Your Credit Score – Your FICO score can impact all of your financial decisions. The higher your credit score, the more freedom you have to make decisions. Also, a good credit score can lead to a lower interest rate on your loan, which means lower monthly payments. A score under 600 means you need to clear-out your credit or prepare for a higher down payment and a higher interest rate.
- Build Savings –Aside from the costs of buying and maintaining a house, you will also be making monthly payments on a mortgage. You will need to have your own savings, so start saving before shopping for a home. Not only will it offer you a financial safety net, but lenders favor borrowers who don’t live paycheck to paycheck. Perhaps you can consider setting additional money apart every month for this purpose.
- Get Pre-Approved – Before shopping for a new home, your financing must be ready. Nowadays, buyers need to get pre-approved to determine their price range. It will also serve as an asset when submitting an offer as the home seller knows you can afford to buy the house and cover the living expenses.
- Find an Agent – Doing this alone will cost you a great amount of time and frustration. If possible, hire an agent to help find properties in your price range, conduct a comparative market analysis, identify overpriced listings as well as give you advice about drafting an offer. They can make recommendations and explain market trends to help you find the best home you can afford that suits your needs.
- Find a House– Avoid overbuying. What’s important is to find a home that is financially comfortable for you. This can mean dialing down your expectations and finding a property within your means.
- Inspect the Home – House hunting also involves inspecting for defects. Look for any hidden problems in the house. By doing so, you can identify any issues that the seller needs to address or that can eliminate the house as a possibility. You might also consider hiring a professional home inspector for a more thorough examination of the property.
- Negotiate the Offer – After inspecting the house, you must negotiate with the seller. If the house needs some maintenance or repairs, you can offer a lower price or add a contingency. Your agent will give you a variety of reasonable price and negotiation options and manage your expectations.
Home buying is a complicated, expensive endeavor but well worth it when you move into your home. Follow these steps to gather the necessary information and to prepare financially, and the process will be a lot smoother.