As you prepare to shop for a house, you might be wondering just how to begin the home-buying process. The process is not as difficult it might seem at first, but it can go a lot smoother if you know the right steps to shopping for a house.
If you are interested in comparing the best mortgage rates through LendingTree click here. It’s completely free.
Shop for House, Step I: Are you Financially Ready to Buy a House?
One of the most important things you have to ask yourself before you decide to shop for a house is whether you’re prepared financially to take on the responsibilities of owning a home.
Shopping for a house implies that you show interest in buying a home. Buying a home is a big financial step. You may or may not know, but there are a lot of expenses you will need to account for.
Related Resources:
- Get Pre-qualified for a Mortgage Online Now
- Compare Mortgage Rates All in One Place
- Check Your Credit Score For Free
First, there is the mortgage you will take the purchase the home and the monthly mortgage payment you’ll make. Second, there are the repairs you will need to make on the house. Repairs and maintenance can be very expensive.
So as you prepare to shop for a house, ask yourself this question: am I financially prepared to buy a house.
Related: 5 Reasons You’re Not Ready to Buy a House.
Shop for a House, Step II: Saving Up for a Down Payment.
Before you decide to shop for a house, you have to make sure you have enough money saved not only for a down payment, but also for closing fees, inspection fees, etc… The conventional down payment required to buy a house is 20% of the home price.
However, you can put down as low as 3.5% if you’re a first time home buyer via the FHA loan program . If you are a veteran, you might not have to put anything down.
Click here to get pre-approved for a FHA loan
Also, your state might have down payment assistance programs where they will give you a certain portion of your down payment. However, there may be conditions to these assistance programs. So be sure to check your state’s website for these kind of programs before you decide to shop for a house.
Regardless of what programs are available, you will need to start saving. In addition to saving for a down payment, you will also need money for things like insurance, property tax, home repairs, etc. If you have a furnace or plumbing issue, you will need money to repair it.
This is what come along being a homeowner. When you’re renting, you only pay rent and the landlords takes care of other costs associated with the home.
Other costs of owning a home you will encounter include water, garbage and power. So you will need to save enough money to cover these other costs. A high interest savings account is a good place to save for your down payment on a house and other costs.
Shop for a House, Step III: Work on Your Credit Score.
If you’re shopping for a house, the chances are you’re thinking of buying a house. Maybe not right away, but buying a home is in your near future. Your credit score is perhaps the most important factor when it comes to buying a house. It’s important mainly for getting a loan.
Honestly, if you’re buying your house with your own cash, you really don’t need to think about your credit score. However, not too many people have $350,000 + cold cash to buy a house. For most people, they will need a mortgage loan.
And to get qualified for a mortgage loan, you need a good credit score. The higher your credit score, the better. In fact, anything above 700 is good. However, note that if you have, say a 580 credit score, you can still get qualified but only for an FHA loan.
Click here to compare mortgage rates through LendingTree. It’s completely FREE.
A good credit score not only will get you qualified for a mortgage loan, you will also reap the benefit of a lower interest rate. A low interest rate on your monthly loan payment means that you’re saving thousands of dollars in interests over the life of a loan.
So maintaining a good credit score before you decide to shop for a house is crucial. There are several ways to check your credit score, but I would recommend MyFreeScoreNow. It’s completely free.
Once you pull out your credit report, check it for any inaccuracies. If there are, fix them immediately. If your score is not where you want it to be, take steps to raise your credit score.
Tips to improve your credit score:
1) Pay your bills on time.
2) Keep your credit utilization rate below 30% of the credit limit.
3) Stop applying for new credit or loan.
4) Get out of debt.
So if you’re planning on buying a house soon, it’s important to have a good credit score.
Shop for a House, Step IV: How Much House Can You Afford
Before you decide to shop for a house, you will need to know how much you can afford. That way you have a clear idea of what kind of house you’ll get and in what neighborhood you want to live in. In other words, you need to get pre-approved for a mortgage loan.
Click here to get pre-approved.
A pre-approved letter is done by a lender, which tells you the amount of money you will be able to borrow based on your credit score/credit history, income, down payment money, and debt.
Shop for a House, Step V: Choose the Right Real Estate Agent
Find the right real estate agent to help you shop for a house.
Buying a house is perhaps the biggest expense you’ll ever make in your life. So, it’s important to get a real estate agent to guide you.
A real estate agent is more knowledgeable in the neighborhood you want to live in. They can guide you on the home price, schools for your children, parks, transportations, etc.
When you’re ready to shop for a house, a real estate agent can help you with 1) researching houses in your desired neighborhood; 2) arrange with sellers for a showing, etc…
Shop for a House, Step VI: Be Ready to Buy the House
After you’ve completed all these steps in the home shopping process, you’re no longer “shopping.” In other words, after you have worked with your real estate agent for a while, and you agent have shown you the houses that you have wanted and have asked for, you have to be ready.
Remember, real estate agents work on commission. As a buyer, you don’t pay them. The seller pays them when the deal is done. In other words, don’t waste your real estate agent’s time. However, do not take this step if you feel pressured to buy a house.
Ready to shop for a house?
Click here to get approved for a mortgage.
Working With The Right Financial Advisor.
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
Related Resources
- Get Pre-qualified for a Mortgage Online Now
- Compare Mortgage Rates All in One Place
- Check Your Credit Score For Free