Important Steps to Take Before Buying a House

Posted by Steph Kaye on Friday, February 28th, 2014 at 4:40pm.

 Be Prepared

If this is your first time purchasing a house, you must have a lot of questions. You might be a little nervous that you'll mess up, and it's normal to feel that way. You are probably spending hundreds of thousands of dollars and making the most important financial purchase of your life.

For anyone buying thinking about purchasing a house there is a lot to consider and steps to be taken even before beginning the process of looking. Some of you will be first-time buyers, while others will be “boomerang” buyers who lost their homes in the housing crisis but are now hoping to get back in. Still others may see this as the best time to upgrade to a larger home, downsize to a smaller one, or to move to the retirement residence of their dreams.

Related blog: Boomerang Buyers

If this is  your first time purchasing a house, you must have a lot of questions. You might be a little nervous that you'll mess up, and it's normal to feel that way. You are probably spending hundreds of thousands of dollars and making the most important financial purchase of your life. Whatever your motivation for buying a home, unless you are going to pay cash for the property, there’s one important step you must take first: get your credit reports and credit scores. This is important because your credit scores will help determine what type of home loan you are eligible for, and the interest rate you’ll pay. You will want to have plenty of time to sort out any errors on your report, such as a bill that does not belong to you, a closed credit card that is still listed as open or mistaken personal information like an address or phone number. The last thing you want is to find out at the last minute that you can’t buy your dream home because of something on your credit report that shouldn’t be there.

If you will be buying and financing a home with someone else such as a partner or spouse, you will each want to get your credit reports and scores. You need to get them from all three major credit reporting agencies; Equifax, Experian and TransUnion, as they each collect their own data and don’t share corrections with each other. You can do this for free once annually at AnnualCreditReport.comYou will find that being an informed individual about the home buying process is empowering for you. 

Find out how much home you can afford
Before you do anything else, find out how much home you can afford. To do this, look online for a reputable mortgage calculator, such as Zillow.com Mortgage calculators show you how much you can afford based on your income, an average interest rate, and the length of the loan.

You also need to calculate your debt-to-income ratio, this shows the amount of your income that goes toward paying your debts. The higher your ratio, the less likely you will qualify for a home loan. Find out if you can get a mortgage before you begin searching for your dream home. If your debt-to-income ratio is more than 36 percent, you should think about getting out of debt, or at least reducing your debt as soon as you can.

A common mistake first-time home buyers make is buying a house that is more than they can afford. Do not rely on the bank to determine what you can comfortably spend on a new home. Banks are not able to  determine the amount of your monthly debt. You should make a list of all monthly expenses, excluding rent or your current mortgage payment. Whatever is left after monthly expenses is the amount available for a mortgage payment and housing expenses such as taxes, insurance and miscellaneous items. Make sure to carefully consider what your budget is and this will save time and frustration by letting you know what you can and can't afford.

 
Pick a real estate agent

 Many times first-time buyers find an agent by looking online, seeing a property they like and then calling the person who represents the home. What is recommended is that you interview two or three agents to see who you feel most comfortable with and feel you can trust them. Talk to friends, family, and co-workers for potential referrals, and use your intuition. If you feel uncomfortable with a real estate agent, keep looking. A good agent should ask you about what exactly you are looking for in a house you want and how long you plan to stay in the home. The agent should also talk about all the costs associated with buying, from closing costs to the possibility of major repairs.  

Get pre-approved
Take the time to get pre-approved before you begin looking at homes. In fact, many real estate agents won't work with you until you have received pre-approval for a mortgage. You might find the perfect home, and then find out the bank denied your loan application. Which would be horrible to lose your dream home, and wasted all of that time. Going to get and Mortgage and going through the process can be a frustrating experience, so be prepared. There is a lot of paperwork, you have to answer a lot of very personal questions about your income, net worth, and credit worthiness. If you have a 20 percent downpayment, a high credit score, and a steady job, then you have a better chance of being pre-approved for a loan.

It is important for you to look at your short and long-term goals carefully to make sure buying a home is right for you.  Be prepared and proactive. Follow your instincts.

 If you would like more information on home for sale, or are first time home buyer not working with a Realtor and would like to schedule a consultation with a qualified Oakland County and Macomb County Realtor, please complete the Lang Premier Properties contact form to have a real estate agent contact you.

 Lang Premier Properties are Birmingham Realtors specializing in Oakland County Real Estate. Stephanie is an agent with Max Broock in Birmingham, Michigan. See what past clients have to say about Stephanie Lang.  Lang Premier Properties looks out for your best interests when you purchase a new custom luxury home. We always recommend working with an experienced luxury real estate agent when buying a new luxury estate.

 



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