Thinking about buying a house? The first step IS NOT looking for homes online. Here are 5 things to do before buying a house – before you even start shopping!
1. Start a savings account.
A lot of banks have programs where you are able to start a separate savings account for something specific and track your saving goals. It really helped motivate us to see our progress when we were saving for a house.
2. Strengthen your credit score.
Before buying a house is the perfect time you can work on strengthening your credit score, which will factor into your interest rate when you go to get a mortgage.
EXPERT TIP: Keep it simple. 3 lines of credit are good to build such as: car loan, paying a bill in your name, a credit card in your name, or a phone bill in your name. Notice I say “in your name” . It doesn’t help if you’re paying a bill in someone else’s name unless you’re just generous and want to help them build credit.
3. Figure out how much you can afford.
Here's a really easy to use home affordability calculator.
EXPERT TIP: The affordability calculator will give you a rough estimate of what you can afford, but going to a lender is much more accurate. When a lender pulls your credit, the creditors understand that you’re looking for a home. It doesn’t affect your credit score, like a credit card credit check does. I’d recommend checking with your bank that you’re already using when looking for your lender. They may offer incentives to customers (some Credit Unions have great rates and less closing costs).
4. Start collecting your financial records and get a prequalification letter from a lender.
I would recommend getting this as soon as possible. When we first started looking at homes, we found a home and wanted to put an offer in right away due to the competitive market. Luckily our lender was able to turn our prequalification letter around quickly (cheers for good lenders!).
Your lender is going to want to review A LOT of documents before handing over that letter. Your lender will send you a list of what documents they need. But typically they will ask for tax returns, bank statements, pay stubs, investment account statements, etc.
EXPERT TIP: Remember that your lender will want ALL pages of those documents even if it’s a blank page. If the lender sees “page 5 of 6” they will definitely want to know where page 6 is if you bring only 1-5.
5. Find a Realtor.
The best real estate agent is an experienced professional who listens to your concerns and knows their market. That person might not necessarily work at the largest brokerage, close the most transactions, or make the most money.
All Realtors are licensed to sell real estate as agents, but not all real estate agents are Realtors. Realtors belong to the National Association of Realtors (NAR), and they pledge to follow the NAR Code of Ethics. The code establishes levels of conduct that are higher than ordinary business practices or those required by law.
Here at Starr Real Estate, we are Proud to be Members of NAR, and look forward to working with you when you're ready to start your home search!