Buying a home can be an emotional, time-consuming, and complex process. Here are a few things that you can do to prepare ahead of time:
Check your credit
Before you apply for a home loan, regardless of your credit, it’s a smart idea to obtain a copy of your credit report from the three major credit bureaus and review the information. If there are errors or things that need to be addressed, it’s easier to address them before you’ve found a home, than when you’re trying to close your loan.
If you know that there are a few blemishes on your credit, let your lender know what they are, why they are there, and why you are a still good credit risk. Lenders look at your credit to determine how likely you will pay back the loan. If you had extenuating circumstances – like a loss of a job or medical bills – let them know so they understand that it is not likely to happen again in the future.
Get approved before you buy
An approval means that a lender has reviewed your credit history, verified your assets and employment, and has approved your loan before you have found a home to purchase. As long as the home will appraise for at least the purchase price, the loan should close.
Getting approved also gives you an advantage over other buyers. Your firm approval makes it easier for you to negotiate on the price of a home as opposed to someone who is not approved, or is only pre-qualified.
While getting pre-qualified may sound official, it is really just getting an idea of what you can afford. It’s having a person plug in a few numbers that you give them – your monthly income and your monthly debt – and getting an approximate payment calculated. From the payment, the calculator can approximate the house price range that you can afford. No information is verified. Because your assets, income or credit is not verified, a pre-qualification has little value when purchasing a home.
Find a great buyer’s agent
Traditionally real estate agents represent the sellers in a transaction. When you’re not working with a buyer’s agent, they are less likely to negotiate the best price or contingencies for you.
A buyer’s agent’s job and fiduciary responsibility (meaning legal duty) is to you, the buyer. A quality buyer’s agent has your interests at heart and will represent these interests in your home search with seller’s agents listing the properties. The services of a buyer’s agent are usually paid for by the seller, and included in the listed price. New home builders pay for these services from their marketing budgets. A buyer’s agent doesn’t collect a commission from the buyer in most cases.