Before you consider shopping for available houses, you must have a sound financial portfolio. A year or six months before you go house hunting, it would be prudent to have a look at your credit report. Carefully examine what your score is and what it means to your chances of securing homeownership. Lenders primarily use this report when determining who best qualifies for a mortgage. You must have attained a certain score to qualify for a mortgage.
What to do before and during a home purchase
Have enough finances
You should have a significant amount of money too. It is recommended that your budget should not exceed 2.5 times your annual gross salary. Take time to converse with lenders on what are the loan options available. In most cases, you will be forced to pick between fixed-rate loans which have fixed interest rates. Their repayment is similar to the life loans and can stretch up to 30 years. An adjustable mortgage rate, ARM, might have an initial fixed rate of interest which is adjustable within a given period.
Understand what lenders want
Most lenders will ask for a 20 percent down payment. If you are still unable to come up with that much cash, you may qualify for other special category loans. When ready to begin shopping, select a lender for preapproval. Preapproval and prequalification are entirely different. Prequalification is where the lenders’ cursory assessment provides details of the amount one can afford with their mortgage. Preapproval is solely based on the person’s actual income, debt records, and credit history.
Those operating under competitive markets might want to advance into pre-underwriting. Thoroughly reviewing all the documentation required to achieve a formal approval takes time. If you do this way ahead of schedule, it will better your chances of getting a good deal.
Understand steps involved in home purchase
Once you get your finances straight, you can begin the process by making a wish list that outlines the stuff you want around your home and neighborhood. Ask yourself questions that help in decision-making. It can be the amount of space you want, or the learning institutions close by.
Once you identify an environment that meets your budget, get in touch with a real estate company agent. The best way to arrive at an agent is by asking friends and family for recommendations. Do not stop there, pick three options and interview them separately. Try to ascertain just how knowledgeable they are about the market and the products they are selling.
When shopping for mortgage lenders ask credit unions and banks for customer discounts. You can do searches on websites to see which lenders offer the lowest rates. The Internet helps a lot when making comparisons. Some costs such as the transfer taxes remain fixed while others vary with different lenders.
Once you get a suitable home, the agent will throw an offer. Expect several counter-offers. After the buyer and seller have signed the contract, the loan processing process begins. This includes the lender’s appraisal. You can carry out an inspection to check if the home meets your expected standards. If there are any concerns, the seller will work on them or deduct their cost from the sale price. The final step is going down to the paperwork which will seal the transfer of ownership.