Sometimes it’s best to just plunge into a new adventure and enjoy the excitement of learning as you go. Other times, a little preparation before you set out makes achieving your goals effectively much easier. Purchasing a home definitely falls in the latter category. With so many things to think about and the need to make educated, financially savvy decisions, taking the time to explore the possibilities and learn how to avoid common pitfalls is simply smart. Do you know how to prepare to buy a house?
How to Prepare to Buy a House
For many people, a home is the largest purchase of their life, so it’s no wonder that the prospect of becoming a homeowner can seem a bit overwhelming. Having a roadmap that allows you to plan for success can help you proceed with confidence. How should you prepare to buy a house?
Start with a Lender
Many aspiring homebuyers think that searching for their perfect home should be the first step to buying it. They’re wrong. Experts routinely advise people interested in buying a home to start their journey with a visit to a lender. Why begin there? As NerdWallet indicates, a visit to a lender offers perspective buyers many benefits:
- A lender can provide information about the various loan programs available, their pros and cons, and which ones might be a good fit for your circumstances.
- A lender can help you discover what you can truly afford. Completing a prequalification or a preapproval process will give you a reliable estimate of how much you’ll likely be able to borrow.
- A lender can point out potential hurdles and offer information on how to fix them. This gives you a chance to address possible problems before they derail your home purchase.
From loan programs, debt-to-income ratios, and interest rates to property taxes, homeowners insurance, and maintenance costs, there are many things to think about when buying a home. Knowing what to expect allows you to plan ahead and prepare for success. Realtor.com suggests taking one or more of the free classes or seminars offered to prospective homebuyers by lenders, real estate agents, local governments, and nonprofits.
Polish Your Credit
Borrowers with better credit scores are generally offered better terms and interest rates, which means that they pay less for the privilege of borrowing money. That’s why it’s smart to polish your credit before actually applying for a home loan. How can you ensure that your credit is in the best-possible shape? Credit Sesame offers several tips:
- Request your credit report and review it. If you find any errors or inaccuracies, dispute them.
- Aim to have at least three active trade lines. Credit card accounts, student or auto loans, and other similar items allow you to demonstrate that you can handle credit responsibly. However, make sure that you open new credit lines at least six months before you intend to apply for a mortgage. Opening new accounts can sometimes cause your credit score to dip temporarily.
- Keep old lines of credit open. As long as they’re in good standing, these accounts boost your credit score. In fact, closing them can reduce the amount of credit available to you and cause your score to drop.
- Pay down your existing debts and avoid taking on new ones. Also, take care to make all payments in a timely fashion.
Build Your Savings
While it is possible to buy a home with little or no down payment, building your savings is a wise idea. As ConsumerCredit.com notes, the ability to make a sizable down payment gives you more bargaining power. More savings can also make you more appealing to lenders and provide you with more financial flexibility.
When it comes to home loans, prequalification and preapproval are not the same thing. Getting prequalified generally involves a quick surface check using information that you provide. In contrast, being preapproved means going through a deeper consideration of your situation and requires handing over documentation of your income, assets, and debts. If you haven’t yet been preapproved, you’ll want to complete the process before beginning your house search. As Credit Donkey points out, being preapproved enhances your buying power by showing that you are serious and able to secure the necessary financing. It can be especially important in highly competitive markets.
Do you have questions about how to prepare to buy a house? Are you curious about the pros and cons of a particular loan program? Do you wonder if there’s a better financing option for your circumstances? Let the lending experts at PrimeLending Twin Cities help. Our experienced team would be happy to answer your questions, assist you in exploring your options, and offer the expert advice you need to move forward confidently. Contact us today to learn more.