Are you planning to purchase your first home in the coming months? Perhaps you’re finally ready to make the move into that bigger house you’ve been talking about. Whatever the case, the homebuying journey is a tedious one fraught with plenty of unexpected turns and delays along the way. That said, there are certain things you need to do to set yourself up for success in the home buying process, and it’s better to begin preparing sooner rather than later. Begin following the steps below immediately as some of them take more time to complete than the others.
Step 1. Build Better Credit
Your credit history plays a big role in not only whether you qualify for a loan or not, but also what kind of interest rate you’ll pay and how much down payment you’ll need. Begin by obtaining your free credit score online and reach out to the credit bureaus with any discrepancies you find. From there, start taking care of any outstanding debt.
Step 2. Save Money
Buying a house is expensive and you’ll need a lot of upfront money to make it happen. For example, you’ll need a down payment, which could be as much as 20 percent of the purchase price. Next, you’ll need closing costs, which total as much as $10,000 in some cases. Lastly, you’ll need to prove to the lender that you have cash reserves in the bank to fall back on in an emergency.
Step 3. Consider Living Somewhere Less Expensive
If you live in a high-tax state like California, it might make sense to consider moving to a less expensive state to save money. Another option would be to move overseas where taxes are less, and the crime rate is lower, too.
Step 4. Change the Way You Think
Many homeowners ask themselves, “What’s the most I can afford to spend on housing?’ when they should be asking, “What’s the least I can spend on housing and still be happy?” Homeownership is expansive. There’s always something needing fixed, but if you’re not living outside your means by paying too much for your mortgage, you can afford to make these repairs without suffering.
Step 5. Be a House Hacker
House hacking is living in a home for nothing. For example, you can purchase a multi-family property, live in one unit, and rent out the rest. The rent you take in from your tenants will pay the mortgage, insurance, and taxes, making it possible for you to live for free.
Step 6. Get the Standard Paperwork Ready
Buying a home requires endless amounts of paperwork, but some of it is standard and you can get it ready beforehand. Gather the last three years’ tax returns, the last three months’ pay stubs, and the last three months’ bank statements and have them all ready when your lender asks for them.
Step 7. Research Lenders and Loan Programs
You have many options when it comes to loan programs, so it pays to understand the requirements of each to determine which fits your situation best.
Step 8. Find a Real Estate Agent
Once you’ve got all your ducks in a row, you can begin house hunting. Find a real estate agent who’s knowledgeable in the area you’re interested in to help narrow your choices down.