If spring looks like the time you’ll be buying a new home, now may seem be too soon to start trying to pin down a specific property. But with a few months to go, it’s time to lay the groundwork.
After all, you’ll need to get your finances in shape, know how to get your best deal on a mortgage, and figure out where, within your budget, you want to live. These things take time, but start now and by the end of winter you’ll be ready to house hunt and then spring into action when you find “the one.”
Price range and downpayment. Most banks and online real estate sites have affordability and mortgage calculators that can help you figure out what you can afford.
Work out your own price range based on what the calculators say. Do those monthly payments look reasonable or like a stretch? Do you expect your monthly expenses to rise, maybe because of a planned car purchase? How long do you expect to stay in this house? Is it worth a bit of a stretch because you plan to stay more than five to seven years? Or would you be more comfortable keeping payments at a lower level?
To determine how much you’ll have for a downpayment, assess what you have in hand and what you can realistically save between now and spring. Don’t forget there will be closing costs. Downpayment calculators will show how much you need for each downpayment percentage required for different types of mortgage.
Neighborhood. Start to figure out where, within your budget, would suit you in the ways most important to you — schools, ease of commute, housing density, amenities. Which factors are most important, which are more open to compromise?
Check out online real estate listings to find out more about what is likely to be on the market and to help you focus in on areas that meet your needs. Keep tabs online on some listings that interest you — see how quickly they sell, whether they undergo price changes as they stay on the market, what they ultimately sell for.
Go to open houses. By looking at houses before you’re actively shopping, you’ll learn how to look effectively. You’ll get better at seeing the details, noticing the important factors, and getting past a first impression to what will really matter.
Credit score. Check your credit report — to know your score and to see if there is anything you want to dispute. You can order free credit reports from each of the three major credit reporting agencies through annualcreditreport.com, the only authorized website for free credit reports, according to the U.S. Federal Trade Commission.
Your credit score will be key to the mortgage interest rate you can get. Between now and when you apply, here’s how to maintain or improve your score:
- Be sure to pay bills on time. Payment history is a top factor for lenders.
- Pay down credit card debt as much as you can while still saving for your down payment.
- Avoid applying for new credit cards or closing old ones. Both can decrease your credit score.
Mortgage. First, check out mortgage rates at various lenders. You’re not ready to apply for a mortgage yet, so you won’t get specific quotes. But many lenders post approximate rates online, and you can browse them regularly so that you get to know the lay of the land.
A month or so before you’re hoping to buy, start shopping for a mortgage. Ask for quotes on rates and closing fees from several lenders. Once you identify the mortgage company, get a pre-approval letter from the lender. With that in hand, you’ll be able to show that you’re a good prospect as a buyer.
For more advice on buying a new home, contact your local HBA.