Buying your first home is an exciting experience. You’ve done your research and are ready to make that financial commitment. But are you really prepared to take the plunge into home ownership?
Many people want to skip the less-than-intriguing parts of buying a home to get to the good stuff—seeing houses, choosing where you’ll live and what your wants and needs are in the new home. That is, however, a mistake. You want to ensure you’ve crossed all your T’s and dotted all of your I’s before getting into the market. Here’s how you do that.
Improving Your Credit Score
One of the first things to consider when looking to purchase a new home is your credit score. A high score—over 700, to be exact—shows that you are reliable regarding credit. However, anything below that and you’ll look risky to lenders. That will lead to higher mortgage rates and more money out of your pocket.
To improve your credit score, you can:
- Pay all of your bills on time
- Pay down all the balances you have on credit cards or lines or credit
- Dispute any errors on your credit report
- Request a higher credit limit on one or more of your cards
- Only use 30% of your available credit at any given time
The Pre-approval
Getting pre-approved after you’ve raised your credit score will be a lot easier and put you in a position to think realistically about what you can afford. When you know your pre-approval rate and mortgage allowance, you’ll be able to look at houses that fit your budget.
A pre-approval is the first step, but we still advise putting a financing condition in an offer.
Know Your Timeline
The time between buying a house and moving in varies drastically. Closing can take anywhere from four weeks to as long as six months. Because of this, you’ll want to know what timeline you’re working with before you start shopping around and making offers.
The average closing sits around two to three months, so if you’re not ready to buy within that timeframe, it’s best to wait until you are. As mentioned above, it could take as long as six months, but you don’t want to risk losing out on a house because you need a longer closing time than another buyer offering the same amount of money.
Watch Out For Hidden Fees
There are many fees associated with purchasing a new home. While the buyer typically avoids the real estate agent fees, other costs such as closing, lawyers, and land transfer tax still fall on the buyer. Without the capital in your bank account to pay these fees, you will be out of luck.
It may be tempting to put all your savings into a down payment to ensure you get a lower mortgage, but always keep roughly 4% of the purchase price on hand, just in case. It may not cost that much, as closing costs vary, but it’s better to have money left over than not enough to cover the closing costs.
Buying a house can be both exciting and stressful, but if you know what you’re in for as a first-time home buyer, you can focus on the exciting stuff a lot easier by being prepared.
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