Spring is in the air and with it an opportunity to get out and start looking at single family homes to purchase. But before you can choose a home style or neighborhood, you will want to improve your credit and look at how much you can afford. Here are some considerations to help you prepare and begin the process of buying a home.
Look at Your Debt and Credit
As a homebuyer, you should start out by looking at your credit and all the debt inclusions on your credit report. Your credit score and report will make a big impact on how much you can borrow. And knowing what it looks like in advance can prepare you for making adjustments and boosting your credit score before you find a home you want to buy and close on it. The higher your credit score is, the better your chances will be to qualify for a better loan with a lower interest rate, which will save you thousands in interest over the life of the loan.
Take some time to review your credit report to determine if there are any errors on your file, and if there are, to dispute them so they can be taken off. It is a good idea to review and work on your credit several months before you start shopping for a home. The process to pay down excess debt and manage your credit so it improves your score can take several months or longer. Talk to your real estate agent or your mortgage broker about recommendations to help improve your credit.
Consider Homes in Your Price Range
As soon as you have your credit figured out, you can apply for a mortgage to see how much you qualify for. This prequalification amount on your mortgage loan will provide you with a maximum amount of how much you can borrow for your home purchase. The rest of your home purchase amount, if any, will need to come from your down payment. You can and should start saving up for your home's down payment before you buy a home. The more money you save the better, because it will enable you to buy more homes when you are ready to make the purchase.
Your real estate agent can assist you in searching for homes that are within your qualification price range. You may qualify for modest starter homes, condos or townhomes, to large homes in more established neighborhoods. Whatever the price range maximum you want to search in, make sure you are comfortable with the potential mortgage payment along with its taxes and homeowners insurance. Then, you will also need to make sure you can afford your other financial obligations and regular expenses. You don't want to buy a home that makes you so "house-poor" that you cannot afford to eat out or buy new furnishings.