You have money saved, a good job and you’re tired of paying rent. It’s time to buy a home. Now what? Where do you start? You are taking on what will likely be the most important financial commitment of your life and it’s not as easy as buying a new pair of jeans. You can’t take it back if it doesn’t fit.
I’ve found that most people start the home buying process on their own and familiarize themselves with the local market by reading the real estate section in the newspaper, researching listings online and visiting open houses. It’s a great idea to do your homework of course, but it’s important not to forget the financial aspect of your research. While it may not be the most exciting part of the home search, it is certainly the most critical.
Start by taking a good look at where you stand financially. You’ll need to know your credit score, make sure it’s in good shape and correct any errors or repair any damage. You should review your savings and understand that besides the down payment, there are closing costs and possibly home repairs to consider. Gather documentation of your income, employment history, student loans and other debts. Properly preparing and reviewing your finances up front will set you out on the right path as you move forward in the home buying process.
Assemble your “Dream Team”
Next, it’s time to recruit a team of professionals. If you read my blog titled “Can We Afford This Home?” you’ll know I am an advocate of sparing yourself the disappointment and wasted time of falling in love with a home you cannot afford. Although the Internet gives buyers unprecedented access to listings and calculators, a qualified mortgage professional can ease some of the anxiety associated with the complexities of the loan process. In the same way a licensed REALTOR® will guide you through the home buying process and advocate on your behalf.
Discover Your Purchase Power
The next step in your financial preparation is to meet with your lender to start the loan pre-approval process. Loan pre-approval means your lender is confident you can make the necessary down payment and that your income is sufficient to cover the monthly mortgage payments. In today’s competitive market, having a pre-approval letter from a qualified lender will prove that you are serious about purchasing a home. In fact, most sellers will not consider an offer unless the borrower has been pre-approved and a signed pre-approval letter from a qualified lender is submitted along with the offer.
As part of the process, your loan advisor will explain which loan programs you qualify for, the maximum amount you can borrow and current interest rates. From there, he or she can set up several scenarios to tell you how much you can afford to spend, as well as your anticipated monthly mortgage payment.
Tools in Your Pocket
When you are finally ready to set out for house-hunting, be sure to bring your mobile phone. In addition to looking up listings, taking photos and making notes, you can tap into your financial research. Apps like Mortgage Coach, which RPM loan advisors use to provide their clients with up-to-the-minute loan quotes, can help you better understand your borrowing options and give you access to personalized resources from your mortgage professional on the go.
By following these initial steps to review your finances and enlist the help of the appropriate professionals, you’ll be better prepared for house hunting and making offers. To learn more, visit www.rpm-mtg.com.
By Lisa Shaffer
Check out Lisa’s webpage at www.rpm-mtg.com/Agent/Lisa_Shaffer.