Purchasing a home takes time and planning. Preparing for homeownership means reducing debt, narrowing expectations, and collecting savings. There are nine things every future homeowner should monitor, complete, or avoid when planning to purchase a home.
Credit Score
The first thing a loan officer will generally review is a potential homeowner’s credit score. Anyone who wants to buy a home should start monitoring and improving his or her credit score approximately six months before purchasing a home. Scores that are too low may delay a home purchase. Future homeowners can increase a score by paying off credit cards and maintaining regular payments on “good” debt (for example, a car loan).
Keeping Debt Under Control
Households that pay off credit cards monthly can skip this section. However, credit card debt should be reduced and eventually eliminated or consolidated before purchasing a house. Credit cards sneak up on people, which is why they can result in unexpectedly large debt loads.
Monthly Budget
Future homeowners should also calculate monthly expenses by adding up bills, living expenses, insurance, loan payments, savings, and retirement. These figures will inform future homeowners of affordable mortgage payments. If there are anticipated home improvement costs, future homeowners can also plan these out.
Wish List
It is easy to get side-tracked when viewing potential homes. The bathrooms, kitchens, patios, backyards, and closets can all look attractive and distract from future homeowner wants or needs. The future homeowner should think about family size, what he or she plans to do with the house (i.e., host guests, operate a business out of it, add a granny flat, etc.), and develop a “must-have” list of features. Finally, and most importantly, homebuyers should stick to that list.
Getting Pre-approved
Once a future homeowner has all financial issues resolved, he or she is probably in a good position to apply for loan pre-approval. If a future homeowner doesn’t have contacts in real estate, he or she will need to do research and compare rates. The loan officer will tell the future homeowner what documents are needed for pre-approval.
Getting a Realtor
After pre-approval, it is time to get a realtor. The realtor should consider the monthly budget, wish list, and pre-approval terms in locating potential homes.
Savings
The future homeowner should tuck away extra money to cover any unanticipated problems. Additionally, having a down payment ready can help homeowners get approved with good rates.
Legal Representation
A home purchase is a legal transaction. You should always retain counsel to represent you with the process once you have gone under contract.
