5 easy steps to take before you start looking for homes
Gearing up to start your home search this spring? Don’t overlook these five important tasks to accomplish first!
Get a handle on your credit
In the months leading up to beginning your home search process, one of the first things you need to do is check out your credit score. Ranging from 300-850, a credit score gives lending institutions a clear picture on how responsible you are with borrowed money.
Go ahead and pull a comprehensive credit check using a free service like annualcreditreport.com so you can check out your score, note any misinformation and get a handle on any serious delinquencies.
Keep reading: 5 easy ways to improve your credit score
Figure out how much you can afford
Grab a calculator and get to work finding out how much you can afford when you follow a simple, no-fail formula for figuring out how much you should spend on a home.
The 33/45 rule suggests that only 33% of your gross monthly income should be tied to your monthly loan amount–which includes your mortgage, taxes and insurance.
You’ll then want to gather all of your debt obligations (the new home included) and make sure that no more than 45% of your gross income is tied to debt.
Know your mortgage options
Besides determining how much you’ll put towards your down payment, it’s a good idea to research first-time home buyer programs.
Here’s a look at some of the most popular:
Good news for first time buyers— there’s a ton of programs and grants designed to help you afford your first home. Here’s a look at some of the more popular first time home buyer programs.
Borrowers with credit scores of 580 or higher should look into FHA loans. With as little as 3.5% down, FHA loans enable many first time buyers to afford their first home.
Buyers desiring to purchase in eligible rural and suburban areas of the country could be entitled to receive 100% financing through a USDA loan.
Active duty military members, veterans and surviving spouses can buy their homes with zero down payment and no private mortgage insurance with the help of a VA Loan.
Backed by Fannie Mae and Freddie Mac, qualified borrowers can purchase a home with as little as 3% down.
Get pre-approved from a local lender
In today’s low-inventory housing market it’s more important than ever to be pre-approved before you even start your home search. Equally as important as getting pre-approved, is working with a local mortgage lender.
With so much competition, sellers want to see that your offer is strong, and part of that equation means you are pre-approved and have chosen to work with a local lender.
Different than a pre-qualification, a pre-approval is the real deal and is a full mortgage loan commitment, subject to a fully executed purchase contract and the completion of appraisal. Essentially, A pre-approval allows you to be ultra-competitive in a low-inventory market.
If getting pre-approved first helps you be competitive in today’s market, choosing a local mortgage lender helps you stand out even more; here’s why:
Having a local lender who understands the market is key. Market knowledge enables an underwriter to easily tackle each element involved in going from contract to closing, as there’s no shortage of hurdles buyers have to overcome during the home buying process, and local lenders are best served to help you maneuver those roadblocks.
Develop a home wish list
Beyond deciding on the ideal house size for you, you’ll want to spend time coming up with a list of must-haves and non-negotiables in terms of your desired home.
Desired number of bedrooms/bathrooms, neighborhood amenities, are drive time to work and school are all factors to weigh. Here’s a handy home shopping checklist to look over as you make your wish list.