How to Prepare for Buying a Home
So, you are considering buying a home. A home is one of the biggest and best investments you may ever make. But before you start searching for that perfect house, there are many important steps you should take to make the process run smoother. Once you are ready, allU.S. and our mortgage partner, CU HomeLand, can help get you started!
The first thing you will need to do is to make a decision on whether or not you are really ready to purchase a house. Bear in mind that owning a house is a lot more expensive than renting as you will be in charge of taking care of all the repairs. There will also be the additional costs that will add up over time such as water, garbage, and electricity. The taxes and insurance for your home will also be your responsibility. If you are not adequately prepared for these expenses, it will jeopardize your financial position. Take the time to accumulate the necessary emergency savings and clear all your debts before you make the step to purchase your first house.
Once you decide to move forward it’s time to get your financial house in order.
- If you haven’t already, start saving for a down payment on your mortgage. Get a copy of your credit report and credit scores (allU.S. and CU HomeLand can provide this service for you). If you find any errors, take action to correct them as quickly as possible (we will discuss this with you if it happens).
- Gather your financial documents – Your Driver’s License and passport or social security card (for the Patriot Act), W2 statements for the last two years, Federal tax returns for the last two years, bank or credit union statements for the last few months, recent pay stubs and proof of other income and proof of investment income.
- The next thing you will need to do is figure out how much you will be willing to spend on your new home and shop around for a loan. allU.S. and CU HomeLand can help here as well to get you pre-approved. By getting pre-approved first, you won’t waste time looking at houses out of your price range. With a mortgage pre-approval, the pre- approving lender will verify your income, debt, savings and credit history and help you determine how much you can afford to spend. Pre-approval will save you valuable time when shopping for your home, give you improved negotiating power and proceed to a closing faster.
To view a home on the market, you will need the assistance of a real estate professional. You can begin by asking for referrals from friends or family members. Once you have decided on your realtor you will want to discuss your preferences for a home, such as location, style of house, size, etc.
Once you have found the home of your dreams, it’s time to make an offer. Before you do, know the price at which you’ll walk away from negotiations because the price is just too high. When crafting your offer consider adding contingencies to the price because everything is negotiable!
Once you find the home, you’ll need to apply for the mortgage. Call allU.S. and CU HomeLand to help you understand your loan options. There are several types of mortgages available – fixed or adjustable rate mortgage. If you plan to live in your home for only a few years an adjustable rate (ARM) would be perfect. ARMs offer lower fixed rates initially and then may go up or down depending on rate conditions. Alternatively, if you plan on staying in your home for several years, a fixed rate mortgage may be the better option.
Once your bid is accepted, you can now go into escrow (this will be done with the help of your realtor). The escrow company will ensure that all documents and finances are in order before the deal is closed. This is put in place to protect you the buyer, your lender and the seller. After moving in, ensure that you changed your address with your bank and cancel your old utilities and set up the new ones.
Owning a home is a big financial responsibility, which is why you will want to have cash reserves to protect you from unexpected expenses such as repairs and maintenance. Start by building a household savings account and set aside funds every month. You’ll be glad you did.
Congratulations – You’re a Homeower!