Buying a home is an exciting time, full of possibilities and pressures. Initial preparation and planning will help make the entire process more efficient and less overwhelming. Here are some things you can do to get started:
Check Your Credit Rating
Even if you are sure that your credit is excellent, it is wise to check. You’d be surprised how many mistakes are made by retailers due to incorrect social security numbers or similar names. If there is an error, write a letter to the appropriate credit bureau. They are required to assist you in sorting things out. This usually takes about 30 days.
Organize Your Paperwork for the Lender
Start gathering your important financial documents. You’ll need this to secure financing for your new home. Your file should contain:
- Financial and asset statements for the last xx months
- Bank account statements for the last two months
- Investment statements for the last xx months
- Credit card statements for the last xx months
- Auto loan statements for the last xx months
- Pay stubs for the last two months
- Tax returns for the past two years
The lender may ask for additional documents, but this will be enough to get started.
Determine How Much House You Can Afford
To save time and energy looking for a home and, even worse, finding the home you want and not being able to afford it, it is best to talk with a lender before starting your search. They will tell you how much house you can afford: this will be the amount of mortgage you qualify for plus the amount of your down payment. They will also be able to advise you on how to select from the many different programs they offer, and on current interest rates. Don’t forget that you will also have to factor in closing costs.
Pre-Qualification vs. Pre-Approval for a Mortgage
Any reputable mortgage representative will “pre-qualify” you. This is an informal estimate of your income, assets and present debt to estimate the approximate price range you should be looking in for your new home.
Obtaining a mortgage “pre-approval” is something different. It means that you have a lender’s written commitment to put together a loan for you, subject to certain contingencies including the house you want to purchase passing the lender’s appraisal. It also tells the seller that a mortgage lender has reviewed your credit, so that there are no hidden surprises. A pre-approval makes you a stronger buyer and puts you at an advantage in bidding for a home.
Be Careful With Your Finances
Now is not a good time to make sudden career changes or large purchases. You want to approach home buying from a position of financial stability.
Investigate Towns and Neighborhoods
Look in newspapers, use the internet, and get in your car to investigate which areas offer homes that are in your price range and will suit your needs now and several years from now. Check out the Choosing a Neighborhood page to learn more.
Make a Wish List
Make a list of your priorities for your home. How many bedrooms and bathrooms do you need? What about schools, community facilities, etc.? Do you have a time-frame for moving? If, like most people, you are working on a budget, separate your needs from your wants. If you happen to find a home offering some of the extras on your wish list, that’s a nice bonus, but remember that ultimately every home purchase is a compromise. Check out our Property Wish List Form for a template
Of course, enlist our help. We are happy to help you strategize with you on your home purchase.