With all the great news of the market steadily strengthening, consideration of buying a new home may be in your thoughts. Whether you are a first-time homebuyer or an experienced homeowner who wants to upsize or downsize, preparation is always best!
This checklist entails the utmost of preparation for purchasing the biggest investment you may be making in your lifetime:
1. Strengthen your credit score. When I purchased my first and second homes, I knew credit was so important to the banks. I had my credit pulled to ensure there were no discrepancies. I also, kept my debt low and was certain not to open any credit cards. Once my score was at the best I could have it at, I ensured to keep it that way by keeping my credit habits consistent. The higher your credit score is, the more flexibility banks may give you with down payments, rate options and fees.
2. Know how much house you can afford. Knowing what is financially comfortable for you will set the path for your home shopping experience. Put the pencil to paper (or tap to text) to calculate the mortgage payment of your intended price range. Also include expenses such as taxes, insurance, utilities and maintenance. Compare this new housing expense to what you are paying now to analyze if you can afford it. One tip: if you can afford it, start putting the difference of the monies aside. This will also allow you to start building additional savings.
3. Save for the down payment and closing costs. This amount will be based on your mortgage product, your price range, taxes, etc. Speaking to a mortgage professional will give you a best scenario of what monies are needed. When using the proceeds of the sale of a current home, ensure you have at least 5% liquid to put down at contract signing on the purchase of your new home.
4. Obtain a mortgage preapproval. Before you begin your home shopping, meet with a mortgage professional to obtain a mortgage preapproval. This document benefits you in three ways:
1. Tells you what you can afford so you have a clear vision of your buying power.
2. It shows your realtor you are a serious buyer and allows him/her to better serve you with finding the right home for you.
3. Lastly, when presenting an offer, your realtor is presenting your written offer along with your pre-approval document; this will show the seller you are a ready and able, buyer!
These tasks are powerful tools in preparing for the home buying process. Taking the time to concur these tasks, will certainly save you time in the long run. It will also dismiss any false hopes that many homebuyers come to experience. Most of all and most importantly, these informative tasks will give you a peace of mind when you are doing ‘life’ in your new home!