Buying a home can be a complicated process. Whether you are a first-time buyer, seasoned homeowner, or investor, purchasing a house is most likely the largest and most significant sort of investment you will ever make. Naturally, you want to do whatever you can to make sure the entire process goes smoothly. Enlisting the services of a quality real estate agent is an excellent idea, but there are certain steps that you can take even before consulting with an agent to make sure you will be able to get the home you want.
First, create a plan to start saving money for your down payment. This can include: identifying some unnecessary expenses that can be eliminated, finding alternate sources of income that you may not have previously considered, and paying off as many credit cards as you can, starting with those that have the highest interest rates. Put away as much as you can because the larger your down payment is, the more you can qualify for later, and the better your offer will look to a seller.
Second, order a copy of your credit report from all three of the major credit bureaus: Experian, Trans-Union, and Equifax. Review your credit reports carefully, making sure there isn’t any erroneous information on any of them. Many people discover items that don’t belong, such as previous balances that have been paid, or an account reported as open after it has been closed. If you find an error, notify the appropriate credit bureau, and contact the company that reported the incorrect information. Next, look for any problems on your report that you can resolve. Pay off as much credit card debt as is possible, and close any unnecessary accounts, starting with the most recently opened. It can take the credit bureaus some time to update their records after you have repaired any problem items, so address these as soon as possible. You want your credit report to be in good shape when you discuss interest rates and loan amounts with a lender.
While you are reviewing your credit report and saving money for a down payment, there are a few things you should remember not to do before purchasing your home. Don’t move money around between your bank accounts or change banks. You need to establish a stable record of maintaining your finances to appear safe to a lender. Don’t incur any additional debt or make major purchases of any kind, especially buying a car. This will increase your debt, thereby lowering the quality of your debt-to-income ratio. Finally, don’t make a career move, or change to a less stable or lower-paying job. Try to avoid these things, and you will make a much more attractive candidate for a new loan.
Next, talk with your lender to find out how much you can afford, and then decide how much you want to pay for a home. If you need assistance finding a lender, contact your real estate agent; normally they can refer you to someone they have dealt with in the past. A lender will be able to pre-approve you for a new loan by verifying your income and debt, and pulling your credit report (that is now sparkling clean). They commonly require a few months of bank statements, the last couple of tax returns, and some further information that you can provide them with to help them make the informed decision to approve you.
Finally, you’ll want to decide what features you will require in your home. You can find the “What do You Want in a Home” questionnaire in our resources section. It is important to determine such things as which area you would like to live in, how many bedrooms and bathrooms you require, how many stories you prefer, and any amenities that you desire. Once you have decided this, you and your agent can search the market for the properties that will best suit your needs, and help you find your next home.
