Buying a home is an incredible experience, complete with a variety of emotions and thoughts, a roller coaster of excitement sometimes intertwined with anxiety and joy. Expectations are often high for buyers, who are ready to find the perfect place, turning a house into a home.
Reality quickly sets-in when the actually house hunting process begins and you're confronted with an astounding amount of choices, in housing types, neighborhoods, financing products, and prospects of the start of a new life. As you can see, there's more to buying a home than completing a home loan application and being approved for a mortgage, but it doesn't end there.
What to Do Before You Apply for a Mortgage
Okay, so you're probably thinking about finances, particularly about your income, debt, and credit file. Well, those are important, and included below, but there are more things you ought to be doing before you apply for a home loan. Yes, it's very wise to pay off old debts, particularly those which might be in collections and nowhere near the seven year statute of limitations drop-off, but putting careful consideration as to your lifestyle in the years ahead. If you're a young couple, it might well be in your plans to have children and they will need to go to school, so, think about the district.
"'Every consumer should establish three lines of credit such as an installment loan and a credit card or two, keeping the balance low and paying them on time, in order to generate a strong credit report,'" says Christine Howard, a senior loan officer with Inlanta Mortgage. --Bankrate.com
Should you be nearing retirement, you'll probably be going from an empty nest house to a smaller one. Size isn't the only factor to consider, such as having room to accommodate out of town guests, so, a location with plenty nearby amenities and activities will be a great fit.
Basically, you should be thinking about the future, not just the cost, your credit score, and finances at-large. You'll be living in your new home for many years which means it ought to bit the right fit for your lifestyle, your wants, and needs, not just in-the-now, but well into the future.
Top 7 Home Buying Secrets
The truth of the matter is, buying a home is a long process, but all too many buyers don't educate themselves about what they actually need to purchase a property. That's unfortunate and if you know the top seven home buying secrets, you'll make the best choice:
- Start budgeting early. You can get a close estimate of what it will cost to own your new home, which of course, includes principal, interest, insurance, utilities, and maintenance. In addition, there will be occasional repair costs to figure into your estimate. You should do this as early as possible to have the time to properly prepare.
- Know your credit well. This sounds all too obvious, but the fact of the matter is the majority of buyers don't get copies of the credit reports prior to applying for a home loan and only learn of problems after the lender has given them notification. Don't fall victim to an unpleasant surprise or many, as over 40 million consumer credit files contain errors. Be prepared to file disputes and fight to get those inaccuracies removed.
- Keep your debt-to-income ratio down. Your debt-to-income ratio is the difference between your gross monthly income and your monthly credit obligations, which is not the same as your take-home pay and your total monthly expenses. Financial advisers recommend that you keep your DTI to under 30 percent to 35 percent.
- Get notified of pocket listings. One of the most powerful buying tools will come straight from your buyer's agent, their network circle of other real estate professionals that are listing properties. It's called pocket listings, which means homes that will be put on the market but not yet on the multiple listing service.
- Get plugged-in to the local MLS. In addition to pocket listings, you can ask your real estate agent to zero-in on specific criteria, with a set of choices for homes just entering the MLS, filters such as price range, neighborhood, square feet, number of bedrooms and bathrooms, and so on.
- Avoid sleeper costs. Sleeper costs aren't just comprised of expenses over and above principal, interest, insurance, and taxes, these are also utilities, maintenance, repairs, and eventual repairs and replacements. For instance, a home might have a roof that's just a bit over ten years old, but it will only age and eventually need to be replaced.
- Don't try to time the market. This is a huge mistake many homebuyers make, believing they can get the best deal by timing the market. It often results in disappointment and frustration so don't fall for the notion that you'll be able to make a decision based on a crystal ball look-see.
Another great bonus tip is to get to know the neighborhood in the present and look into its future.