Important Steps You Should Take Before Buying A Home

This article was written for: blu.ink real estate

 

Buying a new home can be a daunting process, but all of your actions leading up to that process can strongly dictate how seamless the outcome ends up!

Ensuring that you have your ducks in a row before buying a house can ease the amount of work you have to do before settling into your new life!

Check your credit
When you’ve made the decision that it’s time to buy a home, one of the first steps you should take is to check your credit score. The purpose of this is to help determine whether or not you’ll be eligible for a mortgage. Did you know that your score influences your mortgage rate? The higher your score is, the lower your rate will be.

There are three different credit bureaus, and you will need to pay for and gather a report from each of them; TransUnion, Experian, and Equifax.

Keep in mind that most mortgage programs require a minimum credit score between 580 and 620.

We suggest checking your credit score nearly a year prior to purchasing your house to ensure that you have time to improve a potentially low score or dispute anything that shouldn’t be on there.

Our trusted and go-to team for checking this information include:

Know your DTI
Your DTI (Debt-to-income) ratio is an important metric to know, and it’s commonly suggested that you don’t have more than a 40% DTI.

To improve your ratios, we suggest paying off as much debt as possible before applying for a mortgage, this includes money owed on auto loans, credit cards, student loans, and even to collection agencies!

Click here to use this DTI calculator

Save Money
Is Dave Ramsey’s Total Money Makeover on your reading list? Maybe it should be! Saving money prior to buying is a great way to guarantee that you’ll get your dream home. The majority of mortgage programs require a down payment, the percentage of which often ranges. If you are a veteran with a VA loan or a USDA loan, a down payment is not required.

Most places require a 3-5% down payment, which is about $10,000-$20,000 on a $200,000 home, and the more you save, the better off you’ll be in the long run!

If your down payment is less than 20%, it’s very likely that you’ll have to pay mortgage insurance, which protects the lender in the event of a defaulted loan.

Figure out a budget
One of the first steps to figuring out how much you have to spend on a home is to use a mortgage calculator to estimate a breakdown of your monthly costs including:
-Principle and interest
-Private Mortgage Insurance
-Property Tax
-Homeowners Insurance
-HOA/Other fees

Once you have a good idea of what you can afford, you’ll then be able to estimate how much you’ll have to save up for your downpayment and closing costs.

If your loan calculator suggests that you’re able to purchase a home that costs $250,000, one should aim to save at least $13,000 (5%) for a downpayment and an additional $7,000 (3%) for closing costs. This would put your minimum amount to save at $20,000 before going to buy a home.

Keep in mind that regardless of what the mortgage calculator tells you, you’ll still need to meet with a Mortgage Lender to learn how much you truly qualify for.

Get pre-qualified
Getting pre-approved/pre-qualified may be the determining factor that gets you into your home over other competitors as there are some realtors that will only work with buyers that are pre-approved.

So, how do you ensure you’re ready to go? Do the footwork!

In order to get pre-qualified, you will need to send your information to a mortgage lender. This will include basic information such as your financial situation which the lender will then use to determine whether or not you’ll be able to qualify for financing.

In order to get pre-approval, you would need to submit a mortgage application along with any supporting documentation such as paycheck stubs, tax returns, financial statements, W2s and a credit report in order to determine your eligibility for loan approval.

From here, the underwriter will review the information to determine how much you’d be able to spend on a property.

Keep in mind that getting pre-approved for a loan does not guarantee that you’ll be eligible for a loan, it’s simply the lender’s way of letting the bank know that you meet certain stipulations, and are more likely to get approved should you meet other loan requirements.

Find a Realtor
For most, buying a home can be an intimidating and complicated process, and the aid of a professional is often sought out! A Realtor is a wise investment to make when going through the home-buying process as they will answer questions about the process and keep your best interests in mind.

blu.ink real estate is a platform brokerage that has many Realtors who are well-versed in the home-buying process. Our blu.ink realtors are ready to build a relationship with you in order to help you make a house your home, start looking for homes with your blu.ink realtor.

To learn more about blu.ink, real estate, and even tips for home-buying – visit our website for industry-based media on these topics.