Is home buying in your future? If so, it's never too early to start planning.
The real estate purchasing process can take many months from start to finish, especially if you're buying your first home or if you haven't bought one for many years. Don't wait until the last minute to prepare, to maximize your chances of a smooth, worry-free transaction.
Get Your Finances in Order
What is your credit score right now? Do you know?
Mortgage lenders use your credit rating as a major factor in determining your eligibility for a loan. If your score is on the low side, work on building it up before beginning the home-buying process.
Check your credit reports from all three bureaus and correct any errors you find. Take steps to handle past debts, liens or judgments. Pay as much as you can now on outstanding credit card and other consumer debt balances for a quick credit rating boost.
You may also want to consider asking creditors to raise limits on your cards, as this lowers your credit utilization ratio, another important consideration in the mortgage prequalification process.
Finally, take a hard look at your budget. Can you afford a monthly mortgage payment and the other expenses associated with home buying? Try one of the helpful online home loan calculators to see if you are financially ready to buy a house now.
Make a Financial Plan for Home Buying
How much money have you set aside for a down payment? The amount you have to invest will affect the type of loan you qualify for.
If you have limited funds for a down payment, you may be able to qualify for a government-backed loan through the Federal Housing Administration. Members of the military may also be eligible for zero down payment VA loans through the Department of Veterans Affairs.
If you have a sizeable enough down payment and an adequately favorable credit history, you may qualify for a conventional fixed-rate loan. This offers a lower interest rate than other types of mortgages and ensures the same payment throughout the life of the loan.
Some buyers strapped for cash prefer to go with an adjustable-rate mortgage. The benefit of this type of loan is a low introductory interest rate that increases after a set period of time. This keeps your early payments low, but many homeowners find the inevitable rate adjustment down the road difficult to handle.
Regardless of which type of loan you choose, you must prequalify prior to shopping for your new home. This way, you know the price range you can afford, and the sellers know you have the financial capacity to purchase.
Work with a Realtor®
Finding a home you love — and can afford — isn't always easy. However, an experienced real estate agent has the market and local knowledge necessary to find the home you want.
Working with a licensed Realtor® is beneficial even before you start looking for a home, as a local agent understands the ins and outs of the market as well as the process. Your agent can help you understand market conditions and the pricing and negotiation process.
Agents also network with others in the industry and can recommend reputable mortgage lenders, home inspectors and other professionals whose services you may need.
If you plan to buy a home in the near future, get to know the Edie Israel Team today!