Buying your first home will be one of the most exciting things that you do in your life. It will also be one of the biggest financial decisions that you will make and making a bad one could devastate your finances. Preparation is going to be key to making a good decision with respect to buying a home. Here are 5 steps that you should take to prepare to finance a home.
5 steps to prepare for buying a home
- Find a reputable lender: Some of the best resources to help you find a qualified lender and loan officer are from Realtors that do a lot of business. The experienced Realtors know which loan officers and lenders are going to get deals done smoothly and efficiently. If you don’t know an experienced Realtor, just google your city, state and “real estate” (e.g. Las Vegas Nevada Real Estate). Chances are that the #1 organic listing (not an advertisement!) is a very experienced Realtor.
- Get pre-approved for financing: If you can’t get pre-approved for a mortgage than there is not much since in following the next steps. Also, there is a big difference between getting pre-qualified and pre-approved. A true pre-approval means that the mortgage underwriter has reviewed all of your paperwork and signed off on your loan application. If you haven’t yet, you should compile all of the necessary paperwork for the loan application. This will usually include your most recent two years of tax returns and W2′s, 30 days of paystubs, and 2 months bank account statements.
- Make a detailed budget: Believe it or not you can still qualify for more mortgage than you can afford. Thus it becomes imperative that you not take the word of the loan officer. Just because he says you can qualify for a mortgage payment of $1,000 doesn’t mean that you will be comfortable with that. You need to decide for yourself what you are comfortable with and the only way to do this is to give yourself an audit of your personal finances.
- Make a plan for the future: Before you buy a home there are some questions that you need to ask yourself that may help determine the type of home that you buy, where it is located, as well as whether it even makes sense for you to buy a home. If you are in a Masters program for 2 years and may be moving after you graduate, it may not make sense to buy a home. You need to ask yourself, “How stable do I feel in my current job?” ,”Do I want to live in this city for the next 10 years?”, “How many bedrooms do we need for future children?”, “Would I rather pay an HOA fee or mow a lawn once a week?”, etc. etc.
- Communicate to your people: If you don’t share your plans with your loan officer and Realtor than you are setting yourself up for an inefficient and possibly desastrous experience. They get paid for a reason and that is to cater to your every home-buying-related desire. If you tell your Realtor that you want a single family residence and they show you a bunch of condos, maybe you should find better help.
Conclusion
Don’t let a lack of preparation ruin your home buying experience. Taking a few hours to nail down a game plan can save you hundreds of hours of stress and confusion.
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