10 Things to Do When Preparing to Buy a House

A great post by MOTO MORTGAGE I had to share!

10 Things to Do When Preparing to Buy a House

First time buyer? Check these to-do’s off your list before seriously shopping.

When you first decide to buy a home, it’s easy to disappear into daydreams of paint swatches, hardwood floors and wrap around porches. In reality, though, preparation is critical in any big financial decision, and there are few bigger than the purchase of a home. If you’re preparing to buy a house this year, tackle these 10 to-do’s before making an offer.

Preparing to Buy a House Guide

1. Assess the situation

Remember that any home loan is a risk for the lender, so you’ll need to prove you’re a safe bet. Have you jumped from job to job in recent years, or experienced long stints of unemployment? Are you still struggling to pay your student loans? Almost all aspects of your financial situation will be reviewed, so work to get a clear picture now. Begin by reviewing your assets and debts to determine your debt-to-income ratio, or DTI. Most mortgage loan programs will require a DTI of 43% or lower. If your DTI is higher than 43%, you still may be able to get approved for a loan, however, you might pay a higher interest rate. If you’re serious about buying a home, seeing the bigger picture may have you rethinking that job switch, skipping big purchases and prioritizing debt payments.

2. Check your credit

Request a free annual copy of your credit report from each of the three major consumer reporting companies (Equifax, Experian and TransUnion). You’ll likely need a score of over 500 (at the least), but requirements vary greatly depending on program and loan type. If you come across any errors on your credit report, dispute them with the applicable credit reporting company or companies and have them removed as soon as possible. 

3. Start saving

While 20% down isn’t always required, a larger down payment could mean lower interest rates. Utilize a few Motto Mortgage suggested budgeting tips or pick up a side hustle and start saving as soon as possible. Don’t forget to factor in hidden post-purchase costs, from property taxes to HOA fees!

4. Explore down payment assistance options

Special loan programs may be available to qualifying buyers who might not be able to afford conventional or FHA loans. Options include VA loans, USDA loans and various state and local programs. A little help goes a long way, so research offerings in your area for specific details and requirements.

5. Create a loan application packet

Begin gathering all personal financial information a mortgage professional may request. Depending on your situation, this may include income documentation, proof of assets, personal documents, pay stubs, tax returns, bank statements, IDs, previous addresses and social security numbers. Study each document to ensure everything is accurate and complete as you compile. If you’re self-employed or have irregular or W-2 income, plan to provide supplemental information.

6. Consult a mortgage professional

Research and contact mortgage brokers, local banks, credit unions, or others lenders.  Also, ask your REALTOR who they recommend for a mortgage loan.  Bring your assembled loan application packet and any mortgage-related questions. The loan originator will run a credit check and can tell you how much you are pre-qualified for. Keep in mind that many homeowners borrow less than the maximum they may qualify for to account for other expenses and opt into lower monthly payments.

7. Decide how much you want to spend

Next, create a budget based around your DTI, also accounting for food, transportation, insurance, utilities and down payment and closing costs. Consult your loan originator and, factoring in your pre-qualified amount, finalize a mortgage loan amount that you can comfortably afford. Once set in stone, don’t even think about any home outside your budget!

8. Attend a seminar or take a course

Homebuyer education classes help you navigate each step of the homebuying process and, in some cases, may even be required of you depending on your loan program. Courses are approved by the U.S. Department of Housing and Urban Development (HUD), are offered online or in person across the nation, and are often free or low cost.

9. Find the right real estate professional

According to the National Association of Realtors, a whopping eighty-nine percent of buyers recently purchased their home through a real estate agent or broker. Your real estate professional will work with you, finding you the right property, negotiating on your behalf, and guiding you through closing. Research real estate professional options in your area when preparing to buy a house and be sure to meet one on one before finalizing anything. 

10. Start house-hunting

You might want to research cost of living, neighborhood schools, public transportation and crime rate in neighborhoods that pique your interest. Consider number of bedrooms, layout, building materials and other wants and needs. Then, get out and see for yourself! Visit open houses or schedule showings within your price range, noting commute times and neighborhood amenities.

 Many potential buyers spend years dreaming of homeownership before even taking that first step. Fortunately, there’s no time like the present! With just a little research, preparation and planning, you can wrap up this year as a brand-new homeowner.