5 Things You Should And Shouldn't Do When Thinking Of Buying A House
So, you want to buy a new house but you aren't sure where to start. Here is a list of 5 things you should... and shouldn't do, when buying a house.
1. Speak to a Loan Officer and get pre-approved!
First things first. If you are serious about purchasing a new home, you should speak to a loan officer FIRST! It's very important to know how much house you can afford, how much money you will need to save and in some cases, what you need to repair on your credit before you can qualify for a home. Without doing these things, you may end up spinning your wheels and wasting your time as well as your real estate agents time as well. You also don't want to fall in love with a house only to learn after that you cant qualify for it. Speak to a loan officer FIRST and gather all the information you need to begin your home buying mission.
2. Start saving your money!
If you want avoid paying additional private mortgage insurance (PMI), you’re looking at a 20 percent down payment. But coming up with 20 percent may be difficult for many first-time buyers, so mortgage lenders have options with down payments of 10 percent, 5 percent or—if you qualify for special FHA loans —as little as 3.5 percent. So start saving now.
3. Get all of your paperwork ready!
Buying a home is a big process that takes a lot of verified information. Your social security card, drivers license, W2's, bank account statements for at least 6 months. You will also need pay stubs, tax returns and asset statements for any property or investments you may have.
4. Speak to a real estate agent.
You are going to want to speak to a real estate agent that knows your local market that can help you find a home that is not only in your budget price wise, but also knows how the local property taxes will effect your monthly payment and thus effecting how much house you can buy. A great way to find a good agent is to ask your friends on Facebook. You want to go with an agent that is good, knowledgeable and professional. Your friends that bought a home before can vouch for their agent or tell you to stay away if they had a bad experience.
5. Do your research!
A home purchase is a big commitment, do your research! Look into the areas you are looking to buy in. The school district, crime rates, history of resale values, so you have an idea of how economically stable the area has been. Also, do your research at the house. Purchase a home inspection, test the water pressure in the sinks and showers and flush the toilets. Also, drive by the house during different times of the day to get a feel for the neighborhood. You can also use a home buyers checklist to compare the different homes you've seen to help you make a fully informed decision.
1. Don't change jobs or quit your job!
This should be pretty self explanatory here. Then again, so are most of the Don'ts on this list. However, if you see them here, it's because some one has done it before and it cost them the ability to buy a home. Clearly, quitting your job or changing jobs will have a negative effect on your ability to purchase a home. Lenders like to see stability and starting at a new job does not instill confidence of stability. Also, not having a job does not instill confidence that you can pay the loan back.
2. Don't use your credit if you're about to buy a house!
You really shouldn't even be accruing credit inquiries let alone making purchases on credit if you are in the process of buying a home. It effects your debt to income ratio and also makes lenders nervous that you might be taking on too much at once. THIS INCLUDES CO-SIGNING. Do not co-sign for your brother, mother, son, daughter, second cousin, best friend or that guy you 'owe one" for that time he pulled through in the clutch with those tickets to the big game. Do not co-sign for ANYONE prior to or during your process of buying a house.
3. Don't default on any of your loans or credit cards.
No, It's not a smart idea to default on your current rent or mortgage to save for your closing costs or down payment of your new home. And you should definitely continue to make all of your credit card and car payments on time as well.
4. Don't spend your savings
You shouldn't touch your savings you made for a down payment or closing costs. Even if you feel confident that you can pay it back prior to closing. There isn't many things out there that are important enough for you to potentially lose your house over. At least not materialistically. You don't need to use your savings to pay off your credit card that only has a $35 minimum payment. You don't need a new T.V. for your man cave and you certainly don't need that Star Trek bluray box set off Amazon either. Those things can all wait no matter how good of a sale it is. If you have to touch your savings or it will make you late on one of your bills, don't do it!
5. Don't make large deposits into your bank account!
Did some one start a go fund me page to help you with your down payment and now you are the proud owner of $10,000 and 250 anonymous internet friends? That's exciting! However, do NOT deposit that money into your bank accounts without FIRST talking to your loan officer. You need to document anything and everything going into and out of your account, especially large deposits or withdraws. So, along with that loan grandma is giving you for your closing costs, you should not be lending any of your friends large amounts of money either.
If you are thinking about buying a home, talk to one of our professional and friendly Loan Officers today!