What To Do Before Buying a Home
Shopping for a home is an exciting time. You get to envision walking into the front door of a brand new home – creating new memories, sharing them with people you care about, and finally achieving the American dream of homeownership. Certainly, shopping for a home can be overwhelming just as much as it is exciting. Both the excitement and the overwhelming nature of shopping for a home often leads shoppers and buyers to approach some steps of the process incorrectly, or not at all. In this blog post, we want to educate anyone interested in buying a home on how to prepare for the process in a way that will leave you feeling confident, informed, and ready to hit the ground running.
A great place to start is by gathering your financial history and doing some thinking about what you can afford. Not only will it help you to shop for the right home and understand what kind of deal you’ll need to find, but in order to get a mortgage, you will have to provide this information anyway. Check up on your bank accounts and bills to see what your monthly expenses are, and try to think about how your income may change going into the future.
You’ll want to estimate the percentage of your monthly income you currently spend on living expenses, and determine how you can more efficiently handle that money. Next, try and get an understanding of how much you can afford on monthly payments for a mortgage. Most experts and mortgage lenders agree that you should not spend more than a third of your monthly gross income on mortgage payments. With this in mind, do a little calculation. What is a third of your monthly, before tax income? That is the maximum number you should plan to spend on monthly payments toward a mortgage.
Monthly payments on your mortgage can vary quite a bit from buyer to buyer on similar loans. Credit score, the amount of a down payment, and the length of a mortgage all change what the monthly payments on your mortgage can be. It is important to put down as much as you comfortably can, to have a good credit score, and to determine how long the length of your mortgage should be. Visit mortgage lenders online and locally to see what they would be willing to lend to you, and under what terms. You can use all the information to get an idea on how you should negotiate to get the best mortgage for your needs.
The next step is getting pre-qualified or pre-approved for a mortgage. It is extremely important to get at least pre-qualified by a lender. Prequalification is a lender telling you what you are most likely qualified to borrow when you are ready to take out a loan. Preapproval means the lender enters into an agreement to lend money to you, so you can be almost certain you will get a mortgage under the specified terms of the preapproval.
Taking a preapproval or prequalification into the house hunting process will help you to negotiate, and will indicate to the seller that you are serious about buying the home. This will almost certainly help you to get leverage in the buying process – in addition to making your life easier come closing time.
Once you know what you can afford, and have an idea of where you want to live, then its time to see what you can get. Often times, buyers will look at houses before planning what they can afford and determining what mortgage they can get, and are left disappointed or financially unstable when they come to a house they fall in love with but can’t afford. Not only that, but you waste your own and your realtors time when you look for houses without determining what you’re able to get. Preparing financially and opening a dialogue with mortgage lenders are critical steps to take before you start shopping – and will help you to successfully buy a home and secure the best possible deal.