Considering purchasing your first home? Here are five tips to help you prepare for home ownership.
1. Know your credit score. It’s one of the most important indicators a lender will reference when considering your loan application. Also, review your credit report to correct any mistakes and pay off any overdue accounts. Visit annualcreditreport.com to learn how to get your free credit report from the three major credit bureaus.
2. Review your assets and liabilities. Have a good understanding of what you owe, how much you typically spend and how much money you have left after meeting monthly expenses. Tracking this for a few months will give you a good picture of your cash flow and help you determine what you can realistically afford.
3. Get pre-approved. With today’s hot real estate market being pre-approved gives you a real edge with sellers. Being pre-approved – rather than just pre-qualified – means your credit report has been reviewed, your income verified, and you’ve been approved by your lender for a mortgage loan. Someone who is pre-qualified will need time to complete these steps — and then may discover they don’t qualify for a loan or don’t qualify for the amount they’ve offered the seller.
4. Plan for a down payment. While there are financial advantages to having a standard 20 percent down payment (which is based on the value of the home), that’s not always within reach for first-time homebuyers. Fortunately, many states, counties and lenders have first-time homebuyer programs. Some even offer down payment grants that don’t have to be repaid. Educate yourself on what’s available in your community.
5. Find a lender you feel comfortable with. In addition to talking to friends, neighbors and relatives, it’s smart to research the mortgage loan officer (MLO) you’re considering working with. Frequent job changes could warrant a conversation or explanation.