A home is a very important part of every human being’s life. It is a source of great comfort and stability. This is the reason as to why choosing to purchase a home is normally the biggest financial transaction a person will ever make in his or her entire life. It is thus then very important that this decision is reached at with a lot of caution.
It is vital that the right amount of research is conducted before the decision is made and that all required preparations are made in time. It is granted that every home buying transaction is unique in its own way. However there are ten very common things that apply to every home buying transaction.
Things that you ought to do before you apply for any mortgage
Learn the Process of Home Buying
Choosing to go into the transaction blindly will be to your own peril. It is very important that you take time out to learn each and everything that is involved in the process of buying a home. This will give you a chance to make wise and confident decision. There is a lot of home buying; lingo out there that is frequently used, it would thus be advisable for you to read through a number of home buying glossaries.
Get your credit report
Please note that whatever mortgage lender you approach at any time will first look at your credit report before they accept to give you the mortgage. This then goes to say that it is vital that you ensure that your credit report is in order. Obtain a copy of your credit report and look through it to see if there are any errors; you can get it form the internet. It would be highly advisable for you to review your credit report before the mortgage lenders do so.
Immediately deal with all your credit errors
The moment you notice an error on your credit report contact the Company that gave you the report and have them fix it. Fixing errors on a credit report could take quite some time, it is thus better to get started as early as possible. Please do everything possible to ensure that that all your credit errors are fixed well before your meeting with the mortgage lender.
Check your debt to income ratio
Mortgage lenders usually favor borrowers whose debt stands at a maximum of twenty percent of their net income. In the event that your current debt stands at above this twenty percent, make all possible attempts to pay it down before your meeting with the mortgage lenders. This will increase your chances of getting the mortgage.
Decide on your budget
There are mortgage calculators online. You can use these calculators to determine the amount that you can comfortably pay every month and how much this totals up to in terms of the price of a home. This will help you come up with a budget that you are comfortable with and that will not negatively affect your finances. It will also help you as you are out shopping for homes; you will be able to cross out the homes that do not fall within your budget.
Begin saving your money
This is among the best things that you can do for yourself before you go out to buy a home. This is due to a number of reasons. For starters, mortgage lenders favor borrowers with some cash reserves. Having these reserves will also help you to cater for unexpected costs and fees.
Obtain pre-approval for a loan
In the course of pre-approval, a mortgage lender will go through your debts, finances, credit etc. and will then conditionally qualify you for a specific mortgage amount. A pre-approval letter makes sellers take you more seriously. The process will also allow you to deal with any credit problems you may have or any other existing problems with your qualifying factors. This will definitely increase your chances of obtaining a mortgage.
Stay Away from New Lines of Credit
Ensure that you do everything possible to have your financial status remain favorable and stable. It would be advisable for you to pay down a debt or two to provide you with cash reserves. The fact remains that the worst thing you could do at this point is to obtain a new line of credit or loan. At best, this could serve to lengthen your qualification process. At worst, your debt scales will go beyond 20% making it harder for you to get the mortgage.
Validate the Asking Price
There is a reason as to why it is referred to as an asking price. There is no asking price that is definite; everything in real estate can be negotiated. Only accept an asking price after you have conducted enough research to validate it. You could get a Comparative Market Analysis from your real estate agent to aid you with this.
Have a home inspection done
It has never been and never will be a good idea to not do a home inspection! Choosing to invest in a house is a very big decision and you really do not want to have things falling apart after you have obtained ownership of the hone. Home inspections are not expensive and the peace of mind that you will get from it is simply priceless.
Buying a home is a very good decision. However if you fail to do things right, it could be the beginning of all your troubles. Unless you have a lump sum of cash on the ready somewhere, you will need to take a mortgage so as to finance the home.
Failure to adequately prepare yourself will leave you with a huge amount of debt that you are not able to comfortably pay. This will greatly impact your finances and you could even end up losing the home altogether.
That said, ensure that you conduct sufficient research, have all your financial facts straight and carefully follow all the ten steps above to ensure that the home you will buy will be a source of pleasure and not pain.