1. Do Your Research
Buying a home is a daunting task and one that requires answering many questions. The first order of business is to sit down and do your homework. Make a list of your honest necessities versus nice-to-haves. Most mortgage loans are set between 15 to 30 years, but you should be prepared to live in your home for at least five years while your home appreciates. Take a look at your bank statements- do you have enough for a down payment? Do you have an emergency fund for upgrades, repairs, closing costs, and/or unexpected hiccups? Generally speaking, it is always a good idea to have some additional savings set aside.
2. See What You Qualify For
Get a pre-approval letter from a lender BEFORE you start your home search. A pre-approval is a document from a lender stating how much loan money you can get based on your financial information. Not only is this a great personal initiative to assess your budget and where to start your property search, but it will give you a leg up on the competition by taking one less step off a seller’s list when assessing your offer.
3. Be Open to (Virtual) Open Houses
While Covid-19 has disrupted the ability to walk through open houses on the weekends, 3D virtual tours are still a great way to uncover smaller details that can be hidden in pictures. They may not relay sensory information such as odors and noises, but they can assist in narrowing down your list of properties to see in person. Don’t be afraid to reach out and inquire about the age of a property, the neighborhood, or other concerns ahead of time.
4. Strengthen Your Credit
Your credit score determines whether you qualify for a loan, and what your mortgage interest rate will look like. Lenders want to see that your financial behavior is consistent, so they can rely on you for future payments. They will be pulling your credit report when applying for a mortgage pre-approval, and again when closing on the house. You will want to make sure your credit is as high as possible to counteract and set yourself up for the best option possible:
- Avoid closing or opening lines of credit
- Pay your bills on time
- Keep your balance low
- Track your score, and dispute any errors that could potentially harm your report
5. Explore Your Loan Options
There are different types of mortgage loans available depending on your eligibility, the location of your home, and your professional background. The type of loan you choose will affect your down payment amount and home options. The most common types of home loans are:
- The most common types of home loans
- Not guaranteed by the government
- Require as little as 3% down
- Insured by the Federal Housing Administration
- Less strict financial and credit score requirements
- Allow 580 credit scores, and down payments as little as 3.5%
- Guaranteed by the U.S. Department of Agriculture
- For homes in qualified rural or suburban areas
- Require no down payment
- Guaranteed by the Department of Veterans Affairs
- For current and veteran military service members and qualified spouses
- Usually require no down payment
- VA mortgage interest rates are ultra-low
You can find a more detailed explanation of your loan options here.
If you’re ready to buy and have any questions, please feel free to contact us so we may assist you. You can also visit our website here.