A huge financial decision such as buying a home is never something that should be taken lightly. There are many steps involved in the process and even the thought of the sheer amount of money involved makes many people extremely nervous.
However, if you are ready to buy a house: take a deep breath, follow the four steps listed in this guide, and speak to an experienced mortgage professional like the ones at Rex Homes, to put yourself in the best position possible.
Ensure That Your Credit Report is Up to Date
Roughly a year before you start the homebuying process, you’ll want to ensure that your credit score is as high as it can possible be. This will consist of correcting any errors in the report through the three major credit bureaus in Experian, Equifax, and TransUnion. Each of the three entities has instructions for how to correct errors posted on their respective websites.
For a traditional mortgage, you’ll need to have a minimum credit score of 650. However, to receive a lower interest rate, you’ll want to strive to get your credit score above 740.
Define Your Budget
This will be an individual determination based on your income and a variety of factors affecting your debt including:
- Student Loans;
- Car Payments;
- Credit Card Payments;
- Other Factors that May Negatively Affect Your Debt-to-Income Ratio.
While there are certainly other factors that play into your budget, your debt-to-income ratio is one of the most important factors and the more you can improve it, the better off you’ll be when the time comes to apply for your mortgage.
Once you are getting very close to the time you will purchase your home, you’ll want to get pre-approved and make sure you know the range of houses you’ll be able to afford based off of this pre-approval. Pre-approvals are usually valid for 2-3 months once issued, so you’ll want to get to work immediately once you’ve received your pre-approval letter.
Determine the Geographical Location in Which You Want to Buy
Where you’ll end up living is one of the most important factors that sometimes gets neglected by eager homebuyers. There are a number of reasons why this is important including:
- Commute Time to Work. If you’re moving further away from your work, you’ll want to factor this into your homebuying equation. How much gas will you be spending per month with the longer commute? Is there a bus line nearby? These are important questions that sometimes get overlooked in the homebuying process.
- What does your new neighborhood community look like? Is it filled with people who you will get along with, or people with whom you’ll constantly be arguing? While this isn’t necessarily a deal-breaker, it is certainly a valid item to consider when purchasing a new home.
- School System. If you have kids that won’t be homeschooled or attending private school, you’ll want to be certain that they are in a good school system that will foster their education.
If you require any assistance in purchasing a home, reach out to an experienced mortgage professional today. They are ready and willing to help you with any part of the process.