Buying a home is not something that happens overnight. In most cases this is a process that takes weeks and sometimes even months to finish. The applicants that are most prepared to buy usually walk away with the home they desire. Being prepared to buy means more than just having your mortgage items lined up. You need to be ready to make the adjustment from renting to owning. This adjustment can be financial but it is also an emotional one as well. The more prepared you are to buy the smoother the transition will be and the more you will enjoy your dream home. Here are some basic steps you can take today to make buying in the future as easy as possible.
Start saving now. The mortgage landscape is slowly making changes to attract borrowers with lower down payments. Currently all you need is 3% of the purchase price to be qualified for approval. In addition to your down payment money you also need funds for closing costs, inspections and the appraisal. This money should be in your account as soon as you are considering buying. Most loan programs require these funds to be in your account for at least 60 days. The longer they are in your account the better chance you have of getting your mortgage application approved.
Watch your credit. Your credit score is the single most important factor in your loan approval. You can have a large down payment and steady employment but if your scores are too low you may not get approved. Your credit score is affected by every payment you make and new account you open. It is critical during that you maintain an excellent credit score during your house hunting period. Certain loan programs require scores to be over a certain threshold. Excessive credit pulls or a late payment on an old credit card can pull your score below program guidelines. Your credit is the most important asset you have and is important to you to maintain it.
Know your budget. Before you look at a single property it is important to know what you can afford. There is a difference in what you are approved for from your lender and what you are comfortable paying every month. With your monthly payment you have property taxes and insurance that must be added in. If you put less than 20% down you are also subject to private mortgage insurance (PMI) in your payment as well. Start with a number that you are comfortable paying every month and work your home search from there. If you are increasing your payment put this amount away somewhere until you find a property. By getting into the habit of making your new payment you get a sense if that is your true number.
Being ready to act when a property you love comes your way gives you a better chance at getting it. This process does not happen overnight. Take steps today so you will be ready to buy the future.