6 Things to Do Before Buying a Home
Buying your first home is a huge decision, and the process may seem daunting. After all, there are so many choices as well as costs to consider—and there’s so much paperwork involved! Where do you even begin? In an attempt to give you a head start, we’ve created a list of six things we feel you’d best pay attention to before you decide to run the gauntlet:
1. Boost your credit
According to Experian, Millennials have an average credit score of 625. Sounds like a good average, right? Well, not really. In order to get the best interest rate on a loan, you actually need a credit score of 740 or higher.
So how do you improve your credit score? Here are a few ways:
• Pay your monthly bills on time, every time.
• Check your credit report regularly and dispute any errors you may find.
• Learn how to use your credit card strategically and discipline yourself. Maximize your rewards without acquiring more debt.
• Start boosting your credit as early as you can so you have plenty of time to plan and save.
2. Get preapproved
A preapproved mortgage loan lets the seller know you have the capacity to buy their house. You’ll be taken seriously as a buyer and will give you an edge over other interested parties.
In pursuit of preapproval, these are the documents you’ll need:
• Proof of income, including tax returns and W-2 forms from the past two years, recent pay stubs, etc.
• Proof of rent payments for the past year.
• Proof of assets.
• A statement of all of your debts.
3. Make a home wish list
Before you start the search for your dream home, it’ll help if you have a clear picture of what you want it to look like. Rustic or modern? Open floor plan? How many bedrooms and bathrooms? And in which neighborhood?
By listing the features, you’ll be able to estimate what the costs involved are going to be, what you can afford, and where you’ll have to compromise.
4. Create and commit to a savings plan
Your savings plan will depend on your income and lifestyle. It’s up to you to decide which luxuries you can cut and which monthly costs you can trim. For example, do you really need both a Hulu and Netflix account? In the short-term, cutting one of these subscriptions may not seem that important, but it’ll teach you the value of saving.
5. Find the right agent and lender
Make sure you play the field before you make a decision. Interview potential agents and find one who is knowledgeable and experienced, who understands where your head is at and can offer guidance. At the same time, find multiple reputable mortgage lenders, compare the loans they offer, and come to a decision based on that very thorough comparison. An example of a reputable mortgage lender is New America Financial. The 5-star reviews we have received from satisfied clients will testify to our reliability and availability.
6. Prepare an emergency fund
Even your dream home is likely to have a few surprise repairs. Whether it’s a change of kitchen cabinet hardware or a fresh coat of paint, your dream home will need a little tweaking to bring your vision to fruition. Don’t forget to prepare an emergency fund for unforeseen costs; nobody wants to be caught with their pants down!