If purchasing a home is on your agenda this year, plan on the process taking approximately six months in the current market, experts say.
The length of time in applying for a mortgage has increased since the 2008 financial crisis, and while home buyers can’t do much to speed up the process, there are steps you can take to be prepared for what is likely to be the largest purchase in your lifetime.
From determining how much you can afford to which neighborhood you want to live in, here’s a look at the steps you need to take to prepare yourself for the home buying process:
Review your credit score
Long gone are the days when you could get a mortgage without needing to show proof of income and filling out reams of paperwork. Lenders these days are much more strict with their requirements for getting a mortgage and a high credit score is top priority.
Potential buyers should obtain a copy of their credit report six months before they plan to buy to check for errors. Six months allows enough time to improve a borderline score.
Determine your real budget
Before beginning your house hunt, determine what you can afford to pay each month in mortgage payments. It’s important to keep in mind that even if you get pre-approved for a mortgage of $400,000, that doesn’t mean you can afford that large a payment each month.
Many home buyers shop by price, but it’s better to shop based on the monthly payment. In addition to a mortgage payment, you also want to be sure to calculate property taxes, homeowners insurance along with maintenance fees as the total monthly home budget.
Get pre-approved for a mortgage
Even if you think you’ll have no problem obtaining a mortgage, getting pre-approved not only lets you know how much home you can shop for, but it will also give you more negotiating power during the process.
A pre-approved buyer is more attractive to sellers. It also keeps you within your price range of what you can really afford.
Determine if owning a home makes sense
So you’ve been qualified for a mortgage and have determined you budget, but that doesn’t mean you should definitely buy a home.
You first need to evaluate your wants and needs from where you live and any future plans before becoming a homeowner.
Take a look at your life style and goals. For example, do you plan to relocate in a couple years or are you living in an area where you plan to settle for good? Asking yourself these questions will help determine whether you should buy a home or not.
Figure out the best location for you
Most homebuyers have a general idea of a region or city they wish to plant their roots, but it’s even better to be much more specific than that.
Location dictates how you live, so narrow your search to particular neighborhoods. Also figure out what’s important to you, like public transportation, grocery stores or easy access to highways or airports.
Once you have a list of potential communities, then start going to open houses and start contacting real estate agents in that area. Someone that really knows the area will be familiar with every home on the market as well as homes that will soon be up for sale.