Buying a home is a major decision that requires a lot of preparation. Like any big project, a positive home buying experience is all about checking the boxes from start-to-finish. If you’re planning on buying a home in the near future, here are some necessary steps you should take before you put down your deposit.
Meeting with a mortgage broker even before you start looking for a home is important so you can determine in advance how much money you can likely qualify to borrow.
It’s no secret that buying a home is a huge investment. When figuring out how much you need to save, consider the down payment, closing costs and move-in expenses. Your down payment will vary depending on the type of mortgage you choose. If you have a great credit score, it can be as little as 3% down. But don’t be fooled- even 3% can be challenging to save.
Closing costs are fees and payments that finalize your mortgage. They are typically 2% – 5% of the loan amount.
After you purchase the home, you will also want to plan for move-in expenses, home repairs, upgrades and furnishings.
Also, make sure you are aware of the real estate taxes in your area, as well as extra costs such as HOAs when choosing a home.
The better your credit score is, the lower your mortgage rates will be. The mortgage broker will pull a credit report to figure out where you stand. Make sure to pay off as many outstanding debts as possible, and be sure to pay your creditors on time throughout the following year.
Tip: Keep current credit cards open! Closing a credit card increases the portion of available credit you use, which may lower your credit score. Also, refrain from opening too much new credit as age of open accounts boosts your credit score as well.
Take into consideration where you are at in your life, and think about where you want to be in 5-10 years. What are your long term needs? Are you just looking for a starter home or a forever home? Are you planning to start or expand your family? If so, what are the schools like in the areas that you are interested in? Should you be looking at homes with extra rooms for future children? Is the neighborhood kid friendly? What are the neighborhood amenities? What is the traffic like during rush hour? All of these are questions you need to be asking yourself before you decide on a home.
Setting a budget for your new home is a very important step. A good rule of thumb is the 28/36 rule. This rule states that you shouldn’t spend more than 28% of your gross monthly income on home-related expenses and 36% on total debts, including your mortgage, credit cards and other loans you might have.
Paying attention to the market in the area in which you want to buy a home can help you get a better understanding of what homes are selling for and what to expect when you start to look. While doing this, you should compare mortgage rates and fees. According to The Consumer Financial Protection Bureau, it is beneficial to request loan estimates for the same type of mortgage from multiple lenders to compare the costs.
7. Choose a Real Estate Agent
Real Estate Agents can vary depending on your needs. Get referrals from your network, research potential candidates, and interview at least three real estate agents. Go with your gut, but at a minimum you should choose a real estate agent who has:
Once you have completed all of these steps, you are ready to start the search for your new home!
Still need help? Call us today to help you get started on finding your dream home! TJC can help you buy, sell, rent and invest. We have experienced licensed Realtors that live, work and play in the Greater Denver Area ready to assist you. To learn more about our team and services, contact TJC Real Estate and Management Services today!