With the events of the last few years in the real estate market, dealing with the tremendous financial responsibility of purchasing a home can feel overwhelming (and even perilous) at times. Here are a few tips for dealing with the dollar signs.
Strengthen your credit score.
Depending on when you choose to buy, lenders may have tightened their requirements when it comes to borrowers’ credit scores. The basics, however, are timeless: The higher your credit score is, the lower your down payment and monthly payments will be. To bolster your numbers, settle any outstanding debts and refrain from applying for new credit for several months prior to buying.
Secure your savings.
Savings are obviously important for a down payment, but they have additional benefits as well. A homebuyer with three to five months’ worth of mortgage payments set aside is a much better loan candidate, and lenders will often give you a little more latitude on other factors if you can show that you have an ample cushion. A healthy savings account can also act as insurance against unforeseen problems or repairs for your new home.
Get pre-approved.
By getting pre-approved as a buyer, you can save yourself the grief of finding your dream home, only to find you don’t make the cut financially. Your pre-approval will help guide you and your trusted local real estate professional towards a home you can afford. You can also put yourself in a better position to make a serious offer when you do find the right home. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head.
Do your homework before bidding.
Before you make an offer on a home, do some research on the sales trends of similar homes in the neighborhood. Be sure to especially consider sales of similar homes in the last three months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking.
Follow these tips to help you get started on working with an experienced real estate professional – following through with these important steps will help ensure the best deal and the best mortgage on your first home.