Buying a home is simultaneously the most exciting, confusing, and (potentially) frightening time in many people’s lives. The property you choose is not only going to be your home for many years, it’s far and away the largest purchase made by most people.
But you can make the right choice, and preparing is easier than you might think. With these simple, straight-forward tips, you’ll be well prepared to buy a home that will keep you and your family happy for years.
9 Tips for Buying a House: Making the Process Simple and Easy
1. Save for a Downpayment if Possible
Conventional wisdom still holds that you need a downpayment, of at least 5 or 10%, to purchase a home. This is not the case, as there are numerous zero-down options available for specific borrowers purchasing certain homes. (VA and USDA loans are probably the best known, but there are others.)
While you can buy with zero down, if at all possible it helps to have at least something for your downpayment. If you can bring a small amount, you might reduce your interest rate or increase your chances of approval. If you don’t have a downpayment, don’t fret. But if you do, it will certainly help.
2. Check Your Credit Profile for Mistakes, Outdated Information
Even first-time borrowers know that a credit score is one of the most important factors for mortgage approval and the terms of your loan. Because it’s so important, you need to research your credit score and, if needed, make improvements as soon as possible.
Too many people assume their credit score is an accurate, fair reflection of their borrowing activity. But the credit scores are often lowered because of inaccurate information, outdated information, or mistaken identity. (The wrong Jim Smith, for example.) These mistakes can be corrected by contacting the credit agencies.
If your score is low because of poor management in the past, you should begin lowering your debt load, making payments on time, and responsibly using credit to steadily improve your score.
3. Collect the Appropriate Documents
Depending on what type of loan you are using, there can be a lot of documents involved in you mortgage application. Therefore, it helps to start collecting these documents early so you have everything organized and filed in one place.
Documents you’ll likely need for your mortgage application include:
- Tax forms
- Bank statements
- Current rental lease agreement
- List of assets
- List of debt totals and payments
This is just a short list, and you may need more information, so start collecting and organizing documents early.
4. Research all the Available Mortgage Options
There are many mortgage products available, and each one has a different purpose as well as varying details and qualification standards. While your lending agent will be more than happy to explain all the various options, it helps to do a little research on your own so you have a foundational knowledge of mortgage products.
What’s the difference between a conventional loan and an FHA loan? What mortgage products offer 100% financing? What mortgages are easiest to refinance in the future? You don’t have to be an expert, but a strong base of knowledge will give you more confidence while you search for a home.
5. Look at Neighborhoods, Cities Where You’d Like to Live
The neighborhood where you purchase can have a profound impact on your overall happiness and satisfaction with the home. Therefore, you should do plenty of research on the areas, especially if you are moving to a new location.
Preparing to buy a home should include a thorough understanding of all the area’s neighborhoods so you know which ones are right for you. You’ll want to research local parks, amenities, shopping, crime rates, school districts, and other factors so you can target your search to the right locations.
6. Research Downpayment-Assistance Programs
As we discussed above, a downpayment can be a big advantage when you use a mortgage for buying a home. However, if you can’ save the cash for your downpayment, there are options, including downpayment-assistance programs from government organizations and non-profits.
There will likely be income restrictions and other factors for use, but they can help you qualify for a mortgage, and many of the programs offer grants, not loans, for your downpayment.
7. Hire a Buyer’s Agent
The person selling their home likely has a real estate agent. You should too! One of the first steps in preparing yourself for a home purchase is to hire a buyer’s agent, one who is experienced in the industry and knows the local market.
This person can target homes that fit your needs, negotiate purchases and terms, and simply make the process easier for you. Best of all, buyer’s agents are free, as the sales commission is split between the seller’s and buyer’s agent, which is how your representative gets paid.
8. Get Pre-Qualified with a Mortgage Agent
Before you start looking at homes, it helps to be pre-qualified for a mortgage. This is not an official offer from the mortgage lender, but merely a statement that they will, if nothing in your financial picture changes, support your loan. The pre-qualification will provide access to more houses, as many sellers and agent’s only work with people who are pre-qualified. (Basically, they don’t want to waste time on buyers who may be unable to purchase.)
9. Establish Your Budget (and STICK to the Budget)
When you are pre-qualified, you’ll also have a strong indication of how much money you can borrow. This will help you establish a budget, and will allow you to focus your home-search efforts.
It’s important that you stick to your agreed-upon budget. Whatever number you choose, be it $100,000 or $5 million, stick to that budget and don’t let is slowly creep upward, which is easy when you are looking at home almost within reach.
Providing World-Class Support for Your Mortgage
Using these tips, you’ll be ready to purchase a world-class home that will be perfect for your family. If you need more information on mortgages, or if you’re ready to be pre-qualified for a loan, contact our friendly staff and let us help with your next purchase!
