It may be time for you to either buy your first home or your next home. No matter what your situation is, there are a few things that you should do before buying a house – maybe even before you begin shopping for a new home.
1 Check your credit
After months of looking, it may be disheartening to learn that your credit report needs repair, you don’t qualify to buy your dream house or that you need a larger down payment. It may be a good idea to take care of some potential credit issues before you get your hopes up and fall in love with one of the houses for sale in your perfect location. So one of the first steps you should take is taking a look at exactly what is in your credit report. It is recommended to pull your credit report once a year and verify the contents so there are no surprises when you visit the bank to apply for mortgage pre-approval.
2 Figure out how much you can afford
After you have become aware of the items in your credit report and fixed any errors, your next step should be to find out how much house you can afford. You can accomplish this by utilizing online calculators. These calculators will help you determine average monthly costs, interest rates, loan payments, amortization, and other costs associated with the home buying process. We have provided many free calculators in our resources section that can help give you a better idea of what you can afford. If you have any questions or concerns about the validity of the calculation and/or the amounts given, you can always contact a mortgage lender to answer your specific questions.
3 Secure a down payment
After working with an online mortgage calculator or a mortgage lender directly, you may have also learned that you will need a down payment. The down payment is the amount of money you will give to the bank in order for your loan to close. The down payment will also reduce the amount of principle you are borrowing and possibly reduce your interest rate and/or monthly payment. A few examples of money that can be used for a down payment include: savings, stock, liquidate assets or gifts. Be aware the lender may have specific rules and requirements regarding what types of funds can be used for a down payment, and be prepared to provide copies of cancelled checks, money orders or wire transfers.
4 Get Pre-Approved
Finally, the last step will be to get pre-approved for your mortgage so you can begin shopping the available homes for sale.