The process of buying a home is complicated -- and it's gotten more so in the past few years. To make sure everything goes smoothly, you'll want to get organized before you even begin to look for a house.
Once you've taken care of these things, you'll be ready to shop for the home of your dreams.
1. Check Your Credit Score. Examine and fix any blemishes on your credit report, before you apply for a mortgage loan. You should also avoid taking on any new credit at this time, such as new credit cards, buying a new car, and anything else that requires credit or even a check of your credit score.
2. Take A Good Look At Your Finances. Take an honest look at your budget and figure out how much "home" you can afford. What's the maximum monthly mortgage payment you can afford and still have a comfortable amount of wiggle room for other expenses, savings, and the like? Try this free online mortgage calculator. Subtract the amount you have available for a down payment from the maximum price you'd like to pay for a home and enter that amount under "loan amount." Figure an average current interest rate of around 4 percent, and you can see what your approximate monthly mortgage payment would be. Remember -- most loan providers require that your monthly mortgage payment be equal to no more than 28 to 31 percent of your gross (before taxes) monthly income.
3. Beef Up Your Savings. You should enough cash saved to cover your down payment and closing costs. Depending on your mortgage, you'll need anywhere from 3.5 percent to 20 percent of the home's price down, plus cash for closing costs, which can be as much as a few thousand dollars.
In addition, keep in mind that mortgage lenders like to see homebuyers with a healthy savings account. This shows that you have enough money to pay for your closing costs and any incidental expenses, as well as enough money to live on once you move in to your new home. Savers aren't likely to be living paycheck to paycheck, and are good candidates for a loan.
4. Apply For A Mortgage. It's wise to get preapproved for a loan before you start shopping around. This gives you a definitive answer on how much mortgage you can afford, and ensures you have financing ready when you find your dream home -- allowing you to pounce quickly with a competitive bid that is backed up by real money.
5. Refine Your Shopping List. Finally, think about the features you really want in a house. You'll probably live in this house for several years, and you want it to serve your needs for the entire time. After all, if you change your mind in a few years, you may not be able to sell the house quickly.
Shopping for a home is exciting! Take the time to get organized and prepare before you start shopping for a home, so that when you do spot the perfect house, you can be confident and be ready to make a strong offer.
And, as always, if there's any step on this list or anything else at all we can clarify for you or help you with, to help get you in that dream home, let us know!