There are multiple sources available about what not to do when buying a home, but few that help you understand what you should do six months to one year before making one of the largest purchases of your life. Just like studying for major exams, it’s important to study the thing you should to before investing in a home.
Four Things to do Before Buying a Home:
Improve Your Credit Score:
It still holds true that the higher your credit score is, the lower your payments will be. Borrowers with high credit have a strong history of paying their debts or obligations on time. Understand your credit score by pulling and reviewing your report. If you notice anything on your report that you believe to be incorrect, contact the creditor or provider to have it fixed. In the six months before purchasing a new home, refrain from incurring any new debt until your mortgage is closed.
Know Your Purchasing Power:
Your mortgage payment cannot be more than 28-31% of your gross income depending on what program you choose. Use a mortgage calculator to gauge what your payments will be for the price range that you are currently seeking. Make sure that you are comfortable with the payments and try to not max yourself out.
Save for your Down Payment:
You are probably not going into this process without having a good amount of money saved, but remember the more you put down, the lower your payment will be and the more likely you are to NOT be a risk to the lender.
Get a Mortgage Pre Approval:
Consult with a Residential Loan Officer to review your scenario. The Loan Officer will start a file, run your credit, and help you understand exactly what you qualify for relative to your income, credit score and down payment. Then they will issue you a Pre Approval Letter that you will need to present with any offer that you put in for a home.
All four of these steps will help you better prepare for your home purchase. If you feel that you are unsure of one of the above mentioned, spend time trying to mend or better understand it your situation. With a strong score across all four best practices, you should have no problem being on your way to a new home!
Guest post by Alexander Rek, Real Estate
Alexander F. Rek is the Director of Marketing and Business Development at Chicago Financial Services, Inc. (CFS), a boutique mortgage bank headquartered in Chicago. Given Rek’s extensive knowledge of Real Estate, specifically acquisitions, distressed assets, non-performing debt and municipal tax liens, he was recruited by CFS to expand the company’s business throughout the residential mortgage market.