How to Prepare to Become a HomeownerBy Teresa Cowart in Blog,For Home Buyers,Mortgage. Tagged: First Time Home Buyers • Home Buyers • Homeownership • Teresa Cowart
Making the decision to purchase a home of your own instead of renting is one of the biggest and exciting changes you will make in your lifetime. There are a few things you should do in order to make the transition as easy as possible, starting with financial preparation, as well as mental preparation.
Know Your Credit
Having good credit is an essential component of smart home buying, but so many people don’t know where they stand. What’s a good score? What can I do to improve it? How do I even know what’s on my credit report? These are all questions that you should be able to answer prior to dealing with a mortgage lender or broker, as the more informed you are, the more you can do to improve your credit.
The better shape your credit is in, the better your potential to obtain a mortgage to buy a home of your own. Tip – every year you are entitled to a free credit report, which you can get by visiting www.annualcreditreport.com. Use this report (one from each of the three top credit reporting agencies) as a starting point to give you an idea of where you can make improvements.
Lower Your Debt
Before you apply for a mortgage, it is essential to have as little debt as possible. The smaller your debt, the better your debt-to-income ratio will be, a number that lenders use to determine how much they will allow you to borrow.
Lenders look at debt such as school loans, car loans, credit card bills, personal bank loans, as well as child support and alimony, so anything you can do to lower the amounts owed, the better buying opportunity you will have.
Become an Informed Buyer
Having a top notch real estate agent to work on your behalf is the first step in becoming informed about all there is to know during the process. The agent should be able to guide you every step of the way, alleviating the need for you, the buyer, to have to learn the ins and outs on your own.
Save for the Down Payment
The larger of a down payment you can make when buying a home the better, as this will reduce the amount a lender will have to give you, making you a more appealing candidate. As a general rule, plan on having 20 percent of the purchase price to put down. HOWEVER, 20 percent is not a requirement. There are a variety of options available to buyers that allow for a smaller down payment. I’d like to interject a note here; a small down payment does not mean the buyer is not qualified. ( via Bill Gassett, a nationally recognized real estate leader.)
Each of these steps will help you, the buyer, be in the best possible position to make your dreams of home ownership come true.
Getting ready to make the move? Here are a few helpful posts:
10 Common Mistakes of First-Time Home Buyers
Understanding Mortgage Insurance; A Guide for Home Buyers
Common Home Buying Pitfalls: Lynn Pineda
Buy a Home First or Get Married; Which Should Come First?
More Articles for Home Buyers
More Articles for Home Sellers
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