Preparing to Purchase a Home

Things to Consider Before Buying Your Next Home

Purchasing a home isn’t like everyday retail purchases. There is a much bigger financial commitment, and there may be competition. When preparing to buy a home, it is important to keep in mind that other life decisions may impact your ability to purchase a home.

Cancel shopping sprees. Banks will be scouring through your accounts to ensure you are financially worthy of a loan. Don’t make any large purchases or do anything that implicates your credit negatively for about four to five months before buying. Ignoring this will negatively impact your potential loan amount and rate.

Get your credit in line. Your pre-approval process with a lender will require a credit report to be run. This is a good opportunity to rectify any discrepancies with creditors so when you do have an offer accepted, your final loan approval will no longer include those discrepancies. At final loan approval, if discrepancies are cleared, this may improve your score and get you a better rate. This is the “debt” part of the Debt-to-Income (DTI) ratio that comes into play in getting a loan and dictating what amount.

Consider a down payment. Most lenders and loan types will require you to pay some percent of your loan amount as a down payment. Thinking ahead before purchasing a home is important to save money for this. There are some loan types out there that will allow you to put as little as 3% down or zero down for those that qualify.

Don’t quit your day job. Proof of and length of employment are core elements in lenders determining your DTI, so now is not the best time to call it quits with your current employer. Stick around until the closing paper work is signed if you can help it.

Get Pre-Approved

When you want to buy something, it all comes down to money. Your home buying experience starts with Pre-Approval. Understanding your finances will help focus your efforts for everything else after.

Here’s what you will need to get pre-approved:

• Proof of income
• Verification of employment
• Proof of Assets
• Credit check
• Identification – Social Security #, driver’s license, and current address

Pre-approval perks:

• Discuss and learn about loan options and budgeting with the lender.
• Run a check on your credit and alert you to any problems.
• Informs you of the maximum amount you can borrow, which helps set a price range for your search.
• Allows you to make an offer instantly.
• Sets you above the competition without pre-approval.
• Legitimizes your offer, as sellers will be more willing to negotiate with you knowing you can obtain financing.
• Lock in your loan and Rate for 90 days to protect you against market changes.

If you are not quite ready to commit, a Pre-qualification might be a better route to go, as this will give you an idea of what you can afford and help with your home search, without the credit and financial check. Keep in mind that different lenders will pre-approve you for different amounts. If you are looking for some guidance as to which lender would best benefit you, our experienced agents at ERA First Advantage Realty have an extensive list of lenders and loan programs you may qualify for. Connect with a local ERA agent today!