Buying In 2017? 7 Steps You Must Take Now
If you’re thinking about buying a home in 2017, October to December is the perfect time to “warm up” for the house hunt so you can hit the ground running in the new year. And whether you’re looking in Lake Como, New Jersey or Lake Como, Italy… the prep work is relatively the same.
Here’s what prospective homebuyers should do to ready themselves for buying a home. From organizing finances to saving money to finding a real estate agent and mortgage lender, there is plenty to keep you busy!
1. Check Your Credit Score
A credit score is a numerical representation of your credit report. FICO scores range from 300 to 850, and the higher your score, the better. Good credit is like gold when obtaining a mortgage. A higher credit score should net you a lower mortgage rate. That lower rate, even if it’s only 1 or 2% lower, can mean saving thousands of dollars per year.
If your credit score falls short, get busy repairing it.
RELATED: How to Improve Your Credit Score
Correct any errors that might be on your report, start paying all your bills on time, and get your credit limit raised. Note, though, that you shouldn’t max out your card each month. It’s best to use 30% or less of your total available credit.
2. Don’t Open New Credit Cards
Tempting as saving at the checkout line can be, opening new credit cards may hurt your chances of getting a mortgage, or at least of getting the best rate on a loan. What could save you a few dollars now could cost you far more in the long run if your mortgage payments will be higher.
By opening the account, you have created another line of credit. That credit line, and what is borrowed, can change the application numbers and jeopardize the application.
And along those same lines, don’t overspend during the holiday season. Especially on impulse purchases that can be tempting during the holidays.
3. Suggest Financial Gifts for The Holidays
Besides the mortgage loan, you’ll need a sizable amount of cash to buy a house. There’s the down payment to consider, closing costs, and moving costs.
You should also set aside money for unexpected repairs and costs. Not being prepared is probably why nearly half of millennials incurred up to $5,000 in unexpected costs during the mortgage process, according to a recent TD survey.
A potential solution? Bulk up that emergency fund. Instead of getting gifts for the holidays, prospective homebuyers can suggest cash instead that will be put toward their home. And remember, you might be getting some money back after you file your tax return. Don’t blow it on vacation. A tax refund is a great way to add to your cash reserves for a down payment.
4. Interview Potential Real Estate Agents
If your neighbor, relative, or friend of a friend happens to know (or is) a real estate agent, that’s great. This person might be the perfect agent for you. But you owe it to yourself to shop around.
RELATED: How to Interview a Real Estate Agent
Look for an agent that is knowledgeable, good, integral, and can assist you in reaching the goal of homeownership. Make sure they are not a novice, new, or just unaware of how to do a specific transaction. The end of the year is usually a slow time for agents, so take this opportunity of their extra time to truly dig deep during your interview.
5. Keep Tabs On Interest Rates
If you hear that interest rates are at historic lows or that interest rates are on the rise, you should not assume that you can get the rock-bottom rate. Not everyone gets the same interest rate on a mortgage loan. It depends on your financial picture and on the lender you choose.
Everyone knows that home prices are, at least to some extent, negotiable, but loans can be the same. Shop around for the lowest interest rates. Note that closing costs can vary too, so discuss with your real estate agent ways to keep yours down.
6. Find A Mortgage Lender
Before you even start looking for a home (and yes, we even mean browsing online listings), look for a mortgage lender to find out if you can afford to buy a home. If you can’t right now, there’s no use torturing yourself by finding your dream home that’s just out of reach.
But how do you find a lender? If you have a trusted Real Estate Agent with deep roots in the community, start by asking them. They will likely have a network of qualified professionals who can help. Or, if you have a bank you’ve been with for years you can ask them
Compare [that lender] with two others. Look at what they offer, costs, points, and how long to close.” Once you know how much home you can afford, perform your home search based on your preapproval amount or less.
7. Get Preapproved
When a lender gives your financials the once-over and preapproves you for a mortgage, you’ll be able to show sellers that you really can buy their house.
But how do you get preapproved? By preparing a few documents, which you can do several months in advance of the actual purchase.
Here’s what you need to buy a house:
• Tax returns for the past two years
• W-2 forms for the past two years
• Paycheck stubs from the past few months
• Proof of mortgage or rent payments for the past year
• A list of all your debts, including credit cards, student loans, auto loans, and alimony
• A list of all your assets, including bank statements, auto titles, real estate, and any investment accounts
FREE DOWNLOAD: The Ultimate Guide to Buying Your Dream Home
Do you plan to buy in 2017? How are you getting ready? Share your tips on the Patrick Parker Realty Facebook Page, on our Twitter feed or on LinkedIn. And don’t forget to subscribe to the monthly Patrick Parker Realty HOME ADVICE email newsletter for articles, tips and guides like this delivered straight to your inbox.