Buying your first home is a huge milestone, not just because of the new home ownership status, but because of the complex, intricate process that you must go through in order to achieve it. What you do before buying a home is just as critical– if not more so– than what you do after. Take a look at these important things to do before buying a home.
1. Get your credit score in check. According to an article by RIS Media, “As of May 2012, 664 was listed as the national average, and the median was 723.” While some lenders will work with anything above the 600 range in the FICO scale, and even as low as 580, it is in your best interest for your credit scores to be as high as possible. Higher credit scores can mean lower down and monthly payments, lower interest on your loan, and even lower closing costs and fees. By law, you are entitled to receive one copy of your credit report from each bureau (Equifax, Transunion and Experian) per year, so if you haven’t checked your credit score as of late, go to www.annualcreditreport.com to order your free credit reports.
2. Figure out your price range. One of the most financially beneficial things to do before buying a home is to evaluate the full scope of your financial situation early in the game, as early as 12 months before buying. Review your goals, what your ideal mortgage payment would be and how your current financial situation plays into your end goal. A good rule of thumb to determine affordability is that your home expenses should be no higher than 28-31 percent of your gross monthly income.
3. Get a grip on your spending and start saving big! The year before the big purchase is a critical time to get all of your ducks in a row. You need to start saving for your down payment and closing costs as early as possible. Another important tip: avoid major purchases, such as cars, that can affect your credit and your attractiveness to lenders.
4. Stay alert for the best time to buy in your area. Keep yourself informed of home buying and selling trends in the areas where you plan to look at houses so that you can better prepare financially for a home purchase. This will also give you a hint on when the best time to buy is in that area.
5. Get pre-approved for a mortgage. This is one of those things to do before buying a home that first-time home buyers don’t often think about, but could be incredibly beneficial and save a lot of time in the process. Getting pre-approved for a loan before looking at the first house is a great way to determine how much you can afford and what homes you will be looking at. More importantly, it also gives you a head start in a process that has become considerably longer and more complex with the current housing situation.
6. Find a real esetate professional. Real estate professionals are experts and are equipped with information on all facets of the home buying process. They can help you set realistic expectations and guide you through the complex home buying process.