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Saturday, June 7, 2014

7 Steps to Get You Ready to Buy a Home

You’ve decided to take the plunge and buy a home. Now it’s time to prepare yourself for success. This may be the biggest financial decision you make in your life, so you want to take your time and make sure you get it right. However, the housing market is fiercely competitive right now, so you will not have much time to think about making your offer when the right house comes along. The more advanced preparation you can do, the better positioned you will be. Get a leg up on this market!

Here are seven steps to prepare yourself to buy a home:

1. Education and Research

Before you get into the homebuying process, educate yourself on what homeownership entails. There are a lot more expenses to account for than just your mortgage payment. There will also be new commitments on your time. Owning a home is a wonderful opportunity but it is also a serious responsibility. Next, take the time to research where you will buy. Is there a geographical comfort zone between where you want to live and what you can afford?

2. Credit History

Obviously, there is a minimum credit score you need before you can get approved for a mortgage loan. But even if you meet the minimum, you want to raise your credit score as much as possible before you buy. The higher your credit score, the lower your mortgage payment will be. Get a copy of your credit report. Work on fixing any derogatory or erroneous information before you apply for a mortgage.

3. Budget

Is your housing budget realistic? How much more will your homeownership expense (remember this is more than the mortgage payment) be from what you are now paying in rent? What is your down payment goal? How long, at your current savings rate, will it take to save that much?

4. Pre-Approval

You should now be ready to talk to a mortgage lender about pre-approval. Tell your lender your budget and goals to see if it is realistic. The lender may suggest a few extra steps to get better prepared and perhaps have some strategies for bringing your credit score up even further. If the numbers all line up, the lender will issue you a pre-approval. Now you are ready to shop for a home!

5. Priorities

You probably will not find everything you want in a home you can afford. So write down your priorities. If you are buying a home with your spouse or partner, go over this list together. Decide what things are “non-negotiable,” and what features you could live without if necessary.

6. Start Your Search

Tell your realtor about your priorities, both your “must haves” and your “nice to haves.” Your expectations may shift as you begin to look at homes, but don’t let your priorities change drastically. “Settling” for a house that does not meet your expectations will lead to disappointment. It is okay to take your time with your search, but once you find the right house, be ready to make an offer right away. It probably won’t last long.

7. Write Your Offer

Making an offer on a home involves much more than knowing what price to ask. It is okay to ask for some things, but in a competitive market, if you get too greedy at this point, the seller may just take the next offer.

Enjoy Your Home!

All this preparation should make the actual closing process smooth and relatively painless. Enjoy your new home, knowing that you did everything you could to make a smart financial and lifestyle decision.

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