Deciding to buy a home is a major step in anyone's life and it's usually a decision that is reached after a lot of thinking and planning for the future. It's incredibly important to go into the process carefully and to make sure that you're fully prepared for whatever you may encounter along the way.
Before you start looking at real estate, you should:
Decide on a suitable budget for your home
Before you even begin the process of getting pre-approved and meeting with lenders and real estate agents, your first step should be figuring out just what you're going to be able to afford. The best way to do this is to first find out how much cash you have available for a down payment. Then, using a
mortgage calculator, figure out what a comfortable monthly mortgage payment will be for you and your family.
Save, save and save some more
If you haven't already begun saving for a down payment on your home, you should begin as soon as you can. The most common amount to place as a down payment is around 20 percent of the home's value, but even 10 percent or 15 percent is acceptable. However, the more money you're able to put for your down payment, the lower your monthly mortgage payments will be and the better your chances of getting approved for a loan.
Get pre-approved for a loan
Getting pre-approved is the first step in the loan process. The lender will assess your past financial and employment history to determine if you're eligible for a loan, and the amount that you would be eligible for. Once you've been pre-approved, you can begin searching for a home in your desired price range. Here are a few of the things that will be checked when you apply:
- Job history - Where you currently work, your past employment history, how long you've worked there and your income
- Bank statements - All bank statements from all accounts you've opened in the past two years
- Credit history - Any credit card accounts you've opened and the balance on them, as well as your credit score
- Debt - Any debt you've accumulated through loans or credit cards
Find a real estate agent
It's important to find a real estate agent who is not only knowledgeable and highly experienced, but also one whom you can trust and rely on to handle most of the heavy lifting when the negotiation process really gets going in earnest. The best way to find a trustworthy real estate agent is through recommendations. You can also use reviews from websites like Zillow and Trulia, or ask friends and family for options.
Check your credit and your finances
Before you get pre-approved, it's a good idea to go through your credit history, put together your last two years of bank statements and review your finances to make sure that everything is in line. If you have any outstanding loans like car payments or student loans, you'll have to present the relevant documents to the lender in order to get pre-approved. This is to make sure that your debt-to-income ratio is low enough for you to qualify. Also, it can't hurt to check your credit score before beginning the process so you know what to expect when you meet with the bank.
Photo by: Stuart Miles (Freedigitalphotos.net)