You might feel you are ready to buy a home, but are you prepared with the financial knowledge you need? Whether you are a first-time homebuyer or an experienced one, it’s a good idea to have a checklist and follow the appropriate steps to ensure a pleasant experience that leaves you in a position of financial strength.
1. Assess Your Finances and Strengthen Your Credit
Before you even start your search, it’s important to calculate how much home you can afford. This can help you get an idea of whether you can buy the kind of home you want now or whether you might need to save up some more money first. It’s also a good idea to check your credit scores (you can see two of them for free on Credit.com). In general the higher your score, the better your chances of qualifying for a home loan and getting favorable (low) interest rates. If you are not happy with your credit score, you may want to take some time to improve it. Because home ownership comes with responsibility of paying for regular maintenance, repairs, property taxes and home insurance, savings for a down payment is not your only concern.
2. Get Pre-Approved
Receiving pre-approval for a mortgage can save you from wasted time and energy. This is a process where a mortgage lender lets you know if they will lend you money and how much they will lend you. It is usually rather extensive and you will likely have to share financial documents like tax returns, pay stubs and your credit report with the potential lender. With a pre-approval, you have an interest rate locked in. Here are some more details on how to get pre-approved for a mortgage.
3. Check Out Your Options
Performing some research is an important step before buying a home. This can include things like checking out a number of properties in your price range, looking at specific neighborhoods that might be a good fit and perhaps meeting with a real estate agent. Talking to friends, family and co-workers can help get a referral. It’s a good idea to learn about the current market conditions of the area you are look at, whether you do this on your own or with a real estate agent.
Once you feel informed and you’ve looked at how home ownership can fit into your larger financial picture, it may be time to put an offer on a home.
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