February 01, 2017
Smart steps for homebuyers.
Seven steps for success
- Identify your wants and needs.
As you consider size, location and amenities, keep other short-term and long-term financial goals in mind as well. Do you plan to stay in the house for a while and grow your family, or do you anticipate moving again within a few years? As you review your priorities, make a list of must-haves and nice-to-haves.
- Determine how much house you can afford.
Take a close look at your income and expenses, and determine how much you can realistically put toward your house each month. This includes your mortgage payment as well as ongoing maintenance and upkeep costs, utilities, property taxes and homeowners insurance.
- Review your credit report.
A strong credit history is critical to qualifying for a home loan and for getting the best possible interest rate. Review your report for errors and correct them right away. It’s also a good idea to postpone any major credit action, like opening or closing accounts or making large purchases, until you sign your new home loan.
- Get pre-approved by a lender.
Home sellers prefer pre-approved buyers since their credit background has been reviewed by a lender who has deemed them qualified for a specific loan amount. A pre-approval also gives you an edge by showing sellers that you’re ready to buy.
- Review your savings.
How much money have you saved for a down payment? Keep in mind that the more you can afford to pay upfront, the less you may have to borrow. And remember to account for one-time home buying expenses like appraisal fees and closing costs.
- Explore your options.
You may be eligible for an assistance loan program. For instance, an FHA loan gives first-time home buyers some flexibility with a government-insured mortgage. This can bring down the amount of down payment you need to have up front. If you’re a veteran, you might qualify for a VA loan.
- Organize documents.
When applying for a mortgage, lenders typically request recent pay stubs, bank statements, W2s and tax returns. Having these documents easily accessible will prevent last-minute scrambling.
- Select your real estate agent and other professionals. Working with local experts has many advantages, as does lining up your team ahead of time. An experienced real estate agent can not only help you find a home in your price range that meets your needs, but can guide you through the entire purchase process, as well. Once you make an offer on a house, you’ll also need a home appraiser and potentially a home inspector. When you’ve closed and are ready to move, you may need movers or a locksmith. It helps to seek recommendations from friends, family and co-workers. You can also use search engines or websites such as:
- National Association of Realtors®
- American Society of Appraisers
- Zillow Agent Finder
Buying a home is a major financial investment, as well as an emotional one. By doing your homework and preparing in advance, you’ll be better positioned to move into the home of your dreams — at a price you can afford. Fortunately, you don’t have to do it alone; a financial advisor can help guide you through the process as well as help you identify all of your options and come up with a game plan.