Preparing to Buy a Home & Common Home Buyer Expenses
You’ve decided it’s time to buy a house. Now it’s time to get all of your ducks in a row; that include organizing your finances and making decisions on where you want to put down roots. Take action and learn how to prepare to buy a home with the following tips.
1. Save money
It comes as no surprise that getting in the habit of saving money will help. If you have an idea of what you think you can afford for a mortgage payment, you should try to save the difference between your current rent and that mortgage payment every month. For instance, if your rent is $1,000 and you think your mortgage payment will be about $1,500, in February start saving an extra $500 each month. By July, you’ll have an extra $2,500, you’ll be accustomed to your new housing payment, and you’ll show a lender that you can save money and afford a higher payment
2. Work on your credit
Paying all your bills on time and paying off some debt is a good idea. Just be careful not to close any accounts when you’re doing this because this could actually hurt your credit score since you’ll have a lower overall credit limit and you’ll be eliminating credit cards with the longest repayment history. You may be tempted to consolidate your debt on one card with the lowest interest rate, but it’s better to have several cards with a balance under 25 percent of the limit rather than one card that’s maxed out.
3. Schedule a consultation with a lender
While it’s too early to apply for a loan, a lender can pre-approve you for a mortgage. It’s best to have this done as early as possible so you can: 1) Identify the documents you will need for the final loan application; 2) Find out problems with your credit – such as errors on your report that need addressing; 3) Get an idea of how much you can borrow. You probably shouldn’t borrow up to your limit, but it’s important to know how much you can afford before you look at homes. Your lender can talk to you about loan programs and give you an idea of how much cash you’ll need to buy a home.
4. Create a file for important documents
Your lender can tell you what you’ll need to provide for your final loan application, and it helps to start gathering documents and keeping them in a house-hunting file along with materials you collect when you start visiting homes.
5. Start looking at neighborhoods and homes
Once you have a general idea of your price range you can start looking at potential communities to get a sense of where you might want to live. Try to visit neighborhoods at different times of day, on weekdays and weekends to get a sense of what living there would be like. Test out your commute to work and look for amenities that appeal to you. You can look at homes online and at open houses to begin to identify what style of home you like and which features are most important to you.
6. Take a home buyer class
Many nonprofit and government organizations offer classes that can help you prepare for homeownership financially, and help make sure you can handle the responsibilities of owning a home.
7. Get recommendations for a realtor
You should interview a few realtors to find someone you can trust and feel you can communicate with easily. Once you’re ready to shop seriously for a home you should sign a buyer-agency agreement so that you have someone to represent your interests.
Your early preparations can make the entire transaction easier when you’re ready to make an offer.
Here are some common expenses involved with buying a home: