Buying a home is a big deal, especially if it is the first time you are going through the process. If you are preparing yourself to buy your first home, there are some things that you need to keep in mind. Take a quick look at some things you need to do. They are very basic, but they bear repeating.
Protect Your Credit Score
First and foremost, you need to keep your credit score safe. You should start doing this at least 6 months before you intend to make your purchase. That will give you enough time to spot any problems and correct them. Remember, credit bureaus have 30 days to investigate errors so the whole process can take a few months to clear up if you find an issue.
Once you know you credit and made sure that everything is good, you need to protect it. This means two things. It means that you need to monitor your credit and that you should not make any changes to it.
Sign up for one of the free monitoring services available online like Credit Karma. Most credit card companies offer a free service as well, so take advantage. Credit monitoring is crucial because it could allow you to find out about any potential problems while you still have time to handle them.
Next, do nothing. This means do not make any changes to your credit. Do not apply for no credit or do anything that will run your social security number. Any new inquiry on your report could signal to a home lender that you have been issued credit that they do not know about.
Have Your Paperwork In Order
You will need a ton of paperwork when you apply for a loan and it can be overwhelming if you wait until the very end to get it done.
At a minimum, you will need your last two tax returns, several months of pay stubs and 3-6 months of bank statements. If you are self employed, you will also need a profit and loss form. Gather all of your paperwork and scan it into your computer. That way, in the future, when you are asked for something you can respond quickly. Being quick to respond to a loan processor can make all the difference in the world.
Also, try to keep your bank records clean during the period leading up to your home purchase. If a processor sees things like excessive cash deposits, flags may be raised.
Save Your Money
When getting ready to buy a home, you need to save as much money as you can. Moving into a home may be a lot more expensive than you think. Avoid splurging and become Mr or Mrs Frugal in the months before you purchase a home,
You are probably already prepared for the down payment, but there may be more expenses that you have not planned on.
There will also be home inspections, earnest money and money for appraisals. If home deals fall through, you may have to pay some of these fees several times. When it comes to your loan, you may also wind up deciding to purchase points to lower your interest rate. If you intend to be in your home more than 10 years, this is usually a good idea.
In addition, utility down payments and moving expenses can add up in a hurry. After that, you will have things that you want to buy for your home. You want to be able to spend this money and enjoy yourself.
The point is that you need to be prepared. Buying a home should be a fun time in your life and you do not want to find yourself “house poor” right away.
Research Your Options
This means two things, it means knowing your loan options and your home options.
As far as loans go, be sure to know about all of the different loan programs that may be available to you. This includes FHA, USDA and of course VA loans. All of them have different requirements and different benefits. If you qualify, it is hard to beat a VA loan which allows zero down. What you might not know though is that a USDA loan gives you the same benefit and there are areas that are technically rural near most big cities. Do your research.
Lastly, check out all of the areas where you think you might want to live. Research school districts even if you have no kids. It makes a big difference when you eventually sell your home. Also, look up property tax rates. It is not uncommon for neighbor cities to have drastically different rates. Choosing a lower property tax city could allow you to buy more home for the money.