If you have decided to take the leap and make this the year to buy a home, there are a few things you can do to prepare for the house hunting – and, ultimately, home buying – process. Being prepared for purchasing a home can help the process be more efficient, enjoyable, and successful…and less stressful.
Set your budget
Many people go into the home buying process with their own idea of what they can afford, but have not considered how much they are approved to borrow from the bank. The fact is, how much mortgage you can qualify for will ultimately determine how much house you’re able to afford. While buying a home is a monumental moment in your life, it is critical to be realistic about what you can afford, especially as the intensity of buyer demand in today’s housing market drives asking prices higher.
Save for your down payment
Your down payment is a large, one-time payment toward the purchase of a home. Many lenders require a down payment because it mitigates the loss they might suffer in the event that a borrower defaults on their mortgage. While many homebuyers believe that they need a 20% down payment to buy a home, this is not necessarily true. A down payment of that size isn’t realistic for many first-time home buyers and there are a variety of options available for those who cannot afford a 20% down payment, including a conventional loan for as little as 3% down.
There are, however, advantages to making a larger down payment, including the likelihood that you will have more mortgage options, a lower interest rate, and a smaller monthly payment. In addition, if you put at least 20% down on a conventional loan, you won’t need to pay for private mortgage insurance (PMI). As you save for your down payment, also keep in mind that there are other costs associated with buying a home, including closing costs and other fees and costs depending on the type of mortgage loan acquired.
Build Your Credit
Your credit shows your history of how you’ve handled debt and is what lenders and banks use to assess your ability to pay back whatever money you borrow. Your credit score plays a huge role in what loans and interest rates you qualify for. For instance, the higher your credit score, the lower the mortgage interest rate you may qualify for. The bottom line, having a good credit score can make the home buying process easier and more affordable.
Taking steps to improve your credit score and reduce your debt can pay off big as you prepare to get a mortgage. Better numbers mean better loan options with lower interest rates. Keep in mind that your credit score is based on the following information:
- Your payment history
- The amount of money you owe
- The length of your credit history
- Types of credit you’ve used
- Your pursuit of new credit
Partner with a real estate professional
As you set out on a house-hunting mission of your own, you have probably asked yourself whether a real estate agent is really necessary. The answer is yes!
With all the new technology, social media platforms, and websites dedicated to real estate, it can be easy to convince yourself that you understand enough about the process to handle the transaction on your own. Keep in mind, however, that real estate agents are experts in the field and can provide knowledge and resources that you likely do not have access to otherwise.
Get pre-approved for a mortgage
A pre-approval gives you multiple advantages in this fast-paced real estate market, showing the seller that you are a serious buyer and giving you an edge in the case that there are multiple offers on the house. A pre-approval can also help you determine your budget and can save time when it comes time to buy a house since a lot of the paperwork is already completed.
When you have met your homebuying goals and you’re ready to close on your new home, know that at Ohio Real Title, we have a relaxed culture with an open door policy. We love what we do, and we’re really good at it, and we think that is important because everyone deserves an easy, successful transaction during a stressful time. Contact us today.