Buying your first home is an exciting process that is as thrilling as it is scary. It’s something you’ve never done before, which is why it’s essential to do your homework and familiarize yourself with the home buying process. It’s not something to jump into blindly, so do all in your power to educate yourself of what needs to be done and in what manner.
The following tips will make your home buying experience go more efficiently:
1. Organize Necessary Documents For Your Mortgage Lender
When you are going to go speak with a mortgage lender, you’ll have to have documents ready to give them. Don’t go in empty handed, surprised that you needed to bring anything at all. They’ll require recent pay stubs for proof of income, W-2s from the last couple of years, last couple years of tax returns and several bank statements. Having these prepared will save you time and energy.
2. Do a Credit Check to Know Your Score
There are different factors that enable you to get approved for a loan. Having a good credit score is one of them. The higher your score, the more likely you’ll qualify. Go online to your bank, and they provide an area where you can check your FICO credit score. These scores range from 300 to 850. These are the following categories and ranges:
- Excellent: 750-850
- Good: 700-749
- Fair: 650-699
- Poor: 550-649
- Bad: 550 & Below
If you have a less than ideal score, check to see what factors are contributing to what you’ve ranked. You could have too much debt (compared to your available credit limit), may have opened too many new credit cards recently, may have not paid your bills on time, etc. These all will hurt your score. It’s wise to work on increasing your score at least a few months before you begin house shopping.
3. Calculate Your Cash flow
Just as you need to examine your credit score, you’ll have to do the same for your cash flow. How much money do you make, spend and have left over each month? If you are already tight with your budget, are you anticipating needing to spend more on your projected mortgage expenses? It’s essential for you to analyze all of this before making one of the largest purchases of your life.
You need to know what all you owe and how money you have coming in. The best way to do this is to track everything going in and out for several months. You’ll want to try to curve your expenses.
One way to reduce monthly spending, once you own your future home is by having ADT Pulse, an ADT alarm system, which saves money on utility bills. It’s something to consider installing once you’ve moved into your new home.
4. Review Several Different Mortgage Rates
Don’t just get one rate quote from a mortgage lender—roll up your sleeves and get ready to do some rate shopping. According to the Consumer Financial Protection Bureau, you can save over $3,500 during the first five years of your loan if you compare the mortgage rates from 3+ lenders.
5. Save Some Money for After You Move-In
Buying a home is one of the most expensive purchases you can make, but the spending doesn’t just end there. Don’t forget that it’ll continue still after you move in. Once that for sale sign has been removed and you’ve had the moving van pull away after your things have been unloaded, you’ll find you are lacking in things such as furniture, appliances, rugs, etc. If you’ve spent all the money you already had, you won’t be able to properly decorate and furnish your home once you’ve moved in.