Buying a home is so much more than finding a lender, working with a real estate agent, and looking at homes until you find "the one." There are a lot of steps you should take beforehand to prepare and get ahead in this competitive real estate market.
Working on your finances sooner rather than later will alleviate a lot of stress and worry you might have once you get started. Here are a few steps to ensure you set yourself off on the right foot.
Check Your Credit Score
Your credit score is a determining factor for many things, including whether or not you're eligible for a mortgage, how much you can afford, and your mortgage rate. A higher credit score means your mortgage rate will be lower, which will help you over time. Make sure to check your credit score 6-12 months before applying for a loan to improve your credit score if needed.
A couple of key notes regarding credit scores:
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Don't close old credit accounts if you're trying to pay off credit cards.
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Keep your credit card balances low.
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Avoid applying for new credit cards.
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Make all of your payments on time.
Save Up Your Money
Depending on the type of loan you qualify for, different loan types require different down payments. FHA loans require 3.5% down, and conventional loans require 3%-5% down. In addition to down payments, you're also responsible for closing costs, an appraisal, and sometimes inspections depending on if you ask for them in your offer. It's important to be prepared and make sure you have the funds to pay for these items.
Determine A Budget & Stick To It
Before you meet with your lender, come up with your own budget based on how much you believe you can afford. Once you know how much you can afford, it will help gauge a price range and how much you'll need to save for your down payment and closing costs. Just because your lender says you can spend up to a certain amount doesn't mean you have to. Stick to your budget and make sure you're comfortable with what you're spending.
Buying a home is an exciting time, but it's important to be prepared before you dive into anything. If you have any questions about the home-buying process or how to prepare, reach out to me! I'm always happy to help.
