Moving into a new home can be challenging and even more so if you’re a first-time buyer. It’s evident there are plenty of things to do before buying your dream home. You have to be become financially stable, research loan opportunities, and pick the right good location for your new place. Even though buying a house can be overwhelming, you can rest assured the internet has everything you need to help you get through this process, starting with this article.
Here are five things you can do now to prepare for buying a house.
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1. Make sure your credit is ready for a large purchase.
It’s always a good idea to check your credit prior to any major purchases. You can do this by running a credit report from any trusted credit reporting company like Experian or Credit Karma. These reports will show you your credit history, credit score, and mortgage loans. Additionally, they will help you identify any growing opportunities to work on to increase your credit score. It’s important to increase your credit score prior to your home purchase because when you’re in the process of applying for a mortgage, mortgage lenders will look at it and determine whether you’re a responsible borrower or a risky one. As a borrower, you want your credit score to be as high as possible to get better interest rates for your home loan.
2. Save money for a down payment.
The next step is to want to save money for your down payment. Financial institutions usually ask for a 3 percent to 5 percent down payment. This means that if your dream home is worth $200,000, you’re going to have to pay anywhere from $6,000 to $10,000. It’s important to know that if you’re applying for a VA loan or USDA loan, you will not need a down payment. Saving that amount of money can be difficult when managing your finances during a pandemic. This is why you should learn more about finances, debt, and stocks to save up for a down payment during the COVID-19 pandemic.
3. Research loan programs.
Before you apply for a mortgage loan, you need to research the best loan type and options for your financial situation. You want to look into different lenders and compare interest rates, loan terms, and monthly mortgage payments. Mortgage rates can widely vary depending on the financial institution and your financial situation. It’s important to consider your financial future when researching the best mortgage loan for you, as you don’t want all of your money to be spent on a high interest rate. Additionally, you don’t want to spend your whole salary on your mortgage payments as you have other responsibilities and things to spend your money on.
4. Get pre-approved for a mortgage.
Next, in order to gain a lender’s trust, you should consider getting a pre-approval letter from a financial institution of your choosing. This will let your lender see that you are prepared and have everything necessary to borrow money from them. For this step, you’re going to need your W2s, tax returns, bank statements, paycheck stubs, and a credit check. An underwriter will verify your information and determine how much you can afford for a mortgage payment. Now, you can present your mortgage lender with your pre-approval letter for a higher chance at financing.
5. Hire a real estate agent.
Lastly, you’re going to want to hire a real estate agent to handle all the complex paperwork, financial inquiries, and contracts when it comes to purchasing your new home. Be wary of scams and people who only want to trick you for your money. Assess the agent and their broker company and decide if they are trustworthy and knowledgeable enough for your money’s worth.
That being said, it’s time you get out there, manage your finances, and get pre-approved for your next home purchase.
