So you’re finally ready to start seriously considering buying a home. With spring right around this corner, there isn’t a better time to purchase. Whether you’re buying a first home or looking for an upgrade, the acquisition of residential real estate is a long process with many steps along the way. Here’s a few major priorities that you must accomplish before closing any deal.
Checklist of What to do Before Buying a Home
Settle your Debts
If you’re like most prospective home buyers, you will need to take out a loan to finance your purchase. But not everyone’s loan is going to be the same—it depends on a variety of factors, namely your credit score.
Your credit score, a basic outline of your ability to pay off bills and debts, will directly affect your mortgage’s interest rate. If your score is low, you will receive a high interest rate and, in some cases, you may be denied entirely.
Therefore, before diving fully into a real estate deal, you should do everything in your power to raise your credit score. Whether that involves paying bills on time and clearing credit card debt, the amount you spend will be worth the money you save from a lower interest rate on your loan.
Secure a Down Payment
Even though a mortgage may cover the vast majority of your home’s cost, you will also need to have a down payment to present at closing. Usually, you will only have to put down around five to 20 percent of your property’s cost—but the more you shell out, the less you will have to pay off down the line.
Depending on the asking price of the property, your down payment could be a huge expense. If you don’t have the available funds, you should start saving.
Scale back on big-ticket purchases and unnecessary expenses. Over time, the savings will add up. However, if this isn’t plausible for your situation, there are ways to borrow from your IRA—but, considering the risk, it’s best to use traditional saving methods.
Collect your Paperwork
Not every aspect of a home purchase is about crunching numbers and making deals. In fact, a good portion of it is just finding the right paperwork and documents necessary for securing your mortgage. For instance, you should search for forms like:
- Paycheck stubs
- Credit card and student loan information
- Canceled checks for rent or utility payments
Basically, gather up any paperwork that you feel might be useful to a mortgage lender. Besides, the quicker you get everything together, the sooner the home will be yours.
No one ever said buying a home was easy—so just follow these quick, easy steps and that new property should be as good as yours.
