Homeownership is the American dream, but to make that dream come true, you must be prepared. Buying a first home isn’t like other purchases; there are preparations to make well ahead of time. Here are some things to take care of in the months leading up to your home purchase.
Is It Time to Stop Renting?
Not everyone should be a homeowner. You should consider buying only when you are certain that you’re settled in your current job and town or city. The reason is that you’ll want to stay in your home for several years to ensure that you’re there long enough to build equity.
Is Your Credit Ready to Buy Your First Home?
Lenders scrutinize credit scores and credit reports before granting a mortgage. Obtain a copy of your credit report from all three bureaus and find out what your credit score is. Raising your credit score takes time, so start this process as early as possible. Pay off debt as well as any outstanding collections. Fact check everything and file disputes if you find erroneous information. The higher your score is, the better the interest rate you’ll qualify for on your mortgage.
Find Out How Much You Can Afford
Stay within your price range when searching for homes to buy. You can use affordability calculators to see how much lenders might offer you based on your outstanding debt and income. However, remember that you don’t necessarily want to buy the most expensive home that you can qualify for. In addition to the monthly mortgage payment, you must also budget for property taxes, insurance and maintenance and unexpected repairs.
Learn How to Negotiate in a Seller’s Market
When inventory is low, it’s considered to be a seller’s market. This often means that potential homebuyers face a lot of competition from other buyers in the market. You and your real estate agent will need to get creative to ensure your offer stands out. You might need to consider offering above the asking price, including a personal note, or offering to buy “as-is” without a property inspection.
Be Prepared With Extra Funds
The closing table can be an unexpected — and unpleasant — surprise for first-time homebuyers. The reason is that sometimes extra funds are needed to close the deal. In addition to your down payment, you may need extra cash for last-minute costs that only come up on the day of closing. Be sure to have liquid assets, and be sure to bring your checkbook to the closing table!
Learn How to Choose a Good Home
When looking for a home to buy, don’t let surface deficiencies distract you. Don’t worry about things like paint colors or old carpeting; these are easily changed. Instead, consider location, structure and layout. These are the things that can’t be changed once you buy your home.
You should begin preparing to buy your home well in advance. Arm yourself with a great credit score as well as knowledge about how the homebuying process works. Think you’re ready? Take our quiz to see if you’re ready to buy your first home!