Steps for Homebuyers to Take Before Looking for a Home
If you think you’re ready to buy your first home, there are a few things homebuyers should get done before you even start looking for a house. There’s a lot of ground to cover before making an offer and getting to the closing table. For this reason, you want to make sure you’ve completed all of the following steps before you start house-hunting.
Talk to a Mortgage Lender
Understanding your financial health and realistic price range is an important place for homebuyers to start. To get started, homebuyers will want to discuss your situation with multiple lenders to see who can offer you the best financing option for you.
Ultimately, homebuyers want to get pre-approved for a mortgage loan. This will require providing the lender a lot of financial paperwork such as paystubs, W-2s, bank statements, and tax returns. A pre-approval is usually good for between 90 to 120 days, and can often be renewed if your finances don’t change.
Clean Up Your Credit, If Necessary
A mortgage lender will pull your credit when you meet with them for pre-approval. A perfect credit score is 850, but anything above 760 is considered “best” and would qualify you for the lowest interest rates. Comparatively, good is between 700 – 759, fair is between 650 – 699, and anything below 650 is considered to be a poor credit score.
There are a number of factors that go into calculating your credit score including length of credit history, debt-to-credit utilization, and debt payment history. If you do find that your credit score is low, you can take steps to raise it, but it won’t happen immediately. You may have to hold off on house-hunting for a few months until you can clean up your credit.
Decide Where You Want to Live
In order to narrow down your house hunt, homebuyers need to choose an area where you want to live. If you’re not committed to a particular neighborhood, think about your needs as far as commuting, proximity to friends and family, proximity to schools, and general lifestyle needs. Real estate experts say that thinking about your habits such as what you like to do on the weekends or at night can help you decide where you want to live.
Don’t Damage Your Credit
Even though your loan may be “pre-approved,” you want to keep your finances in tip-top shape until the loan has gone through the complete underwriting process. This may not happen until just a couple of days before closing. That means that you should avoid taking on new debt such as a car loan.
In addition, make sure to pay all your debt payments – like credit card payments and student loan payments – on time. Avoid doing anything that would affect your credit score in a negative way before your loan closes.
Buying your first home doesn’t have to be complicated as long as you are properly prepared for it. Make sure your credit is in the best shape possible to get the best interest rate when getting pre-approved for your loan. By being prepared from the start, you should be able to navigate the home-buying process more easily.