Home purchase requires adequate preparation. Preparation will help you know what to buy, which processes to follow, and how to avoid regrets. Below are some tips to prepare you for the milestone.
Analyses Your Finances
Analyze your finances to understand your financial strength. For example, you should know:
- The total debts you owe
- How much cash you can get, and how fast you can get it
- Your future income
All these will affect your mortgage application and home purchase. For example, mortgage companies are interested in your debt-to-asset ratio. You may need cash for the closing costs and down payment if targeting a mortgage purchase.
Clean Your Credit History
Your credit score determines your mortgage application. The score determines the mortgage amount, rate, and even term. Clean your credit history to ensure it reflects your true situation. Review your credit score for its accuracy. Dispute any errors in your report with the credit rating agencies. Pay as much of the pending debts as you can safely do.
Avoid Further Credit
Additional debts may affect your credit score and affect your debt-to-asset ratio. Avoid further debts until you finish the mortgage application and property purchase. You don't want to give the mortgage company any reason to complicate your loan processing.
Financial institutions have different mortgages for different people and circumstances. Examples include:
- Jumbo loans – huge mortgages for those who can afford to buy expensive homes
- Fixed-rate mortgages whose interest rates remain the same for the entire loan term
- Government loans with low-interest rates and specific qualification criteria
Research the available offers to prepare for the best one for your situation. For example, consider a jumbo loan if your finances are strong and you want to buy an expensive house.
Research Property Market
Research and understand the property market before you begin looking for a home. By this time, you should understand your home purchase budget. The market research will help you know the type of home your budget can get. The research will also help you understand:
- How long it may take you to get a home
- The neighborhoods that fit your budget
- Whether home prices are increasing, stagnating, or decreasing
You may get valuable data online, but a consultation with a realtor will give you the most up-to-date information.
Involve real estate professionals in your home-buying process. For example, a real estate agent already has the information you may have to research if you try the process alone.