Whether you are a first time home buyer, or you have bought a home before, preparing for a home purchase is no small task. Preparing yourself for this major purchase is one way to reduce the stress that is often associated with buying a home. With a little bit of planning and research, you can reduce the amount of stress and surprises throughout the home loan and home buying process. Below are 5 ways to prepare for buying a home.
1. Know your credit score and improve your credit score if necessary.
The mortgage lender you choose for financing your home will review your credit score and credit history to help determine if you qualify for a home loan. Your credit score also has an impact on the interest rate you will receive for your home loan. Order your free credit report and ensure there are no discrepancies with what has been reported to the credit bureaus. While credit score minimums for various loan programs differ, credit scores requirements also vary from lender to lender. As a general rule of thumb, if your score is below 640, you’ll want to work on improving it before applying for a home loan. Want to improve your credit score? Read our blog post on How to Improve Your Credit Score.
2. Start saving money now.
Having a healthy cash cushion looks great to all lenders. There are home loan programs with zero down payment but not all buyers qualify for those programs. Aside from the no down payment programs, down payments can vary from 3%-20%. In addition to saving for a down payment, you will want to save for closing costs and loan fees. Closing costs vary based on your lender, your loan program and where you live. As a rough estimate, if you buy a $200,000 home plan for $2300-$4000 in closing costs. Another reason to start saving? Repairs and maintenance on your new home. While you hope you won’t have any major issues after moving in, you want to ensure you have a safety net should you need a new roof, hot water heater or furnace. Start saving today! Whether that’s cutting back on how many times a week you dine out, or opting for a Red Box movie over the theater, having a healthy savings account looks great on you as a buyer.
3. Get pre-approved for your mortgage.
In Denver’s current real estate market, inventory is low and the competition is high. Before you even step foot into a home you may possibly want to purchase, we highly recommend getting pre-approved on your home loan. This will give you the price range in which you should be looking, as well as strengthen your offer and illustrates that your financing has already been approved. Another benefit of getting pre-approved is that you are empowered to either buy at the top or bottom of your price range. It is also nice to know exactly what your wiggle room is when you make an offer. Want to start the pre-approval process? Click here.
4. Buy a house you can afford today and make sure you love it!
Don’t feel pressured into buying a home by anyone or anything. You may hear that it’s a buyer’s market…or that interest rates are only going to go up. Try your best to tune the noise out. Buying a house that you love and will be happy in for a while is a smart purchase. You never know what the market is going to do so buying a home because you think it is going to appreciate over time doesn’t always pan out. If you buy a home you love, that you can afford today sets you up for financial success now and in the future. In addition to making a smart decision about the home you buy, we can’t stress enough the importance of buying a home you can comfortably afford. At Banner Mortgage, we take extreme pride in ensuring our borrowers are comfortable with their monthly mortgage payments, and are not “house poor.” Make sure your mortgage does not leave you living paycheck to paycheck without any wiggle room for saving, or for living life!
Banner Mortgage has been providing home loans since 1992 and is a trusted Colorado lender. If you have any questions please reach out! We help people understand their credit reports, which loan programs they currently qualify for and can help you come up with a plan to get you into the home of your dreams! Fill out the form below to get started today!