Becoming a homeowner is an exciting step to take if you’ve only ever rented. That being said, the journey to owning a new home goes through uncharted territory. It’s important to ensure that you’re actually ready to purchase a home before you embark on the journey to being a new homeowner.
While everyone’s journey to homeownership will be different, there are a few common guidelines that should be followed if you’re serious about buying a house. The following five steps are the smart sorts of things you want to be doing as you lead up to your home search process.
1. Save up a downpayment.
This is likely going to be the step that takes you the most time, but it doesn’t need to be as arduous as you might initially think. While conventional wisdom recommends saving a 20 percent downpayment in order to avoid private mortgage insurance (or PMI) payments, there are some situations where paying PMI might not be that bad. For example, if you’re only going to be paying about $80 or $90 in PMI, and your mortgage will otherwise cost considerably less than rental prices in your area, it may make sense to save up a downpayment of 5 or 10 percent and use an FHA loan to buy a property. Whatever is the right path for you, make sure you research it in depth and save up the right amount to get started.
2. Boost your credit score.
In order to get the best rates when you apply for a home loan, you’ll want to make sure that you have a good credit score. While it’s possible to obtain a mortgage with a credit score of 650 or higher, generally speaking, a score of over 740 is what you want to be shooting for when it comes to taking out a mortgage. Keep in mind that the better your credit is, the less you’ll be paying in interest on one of the most expensive loans you’re likely to ever take out. This means that paying down those credit cards and auto loans aggressively is definitely worth the effort!
3. Get pre-approved for a mortgage.
Once you feel like you’re ready to start shopping around, you’ll want to get pre-approved for a mortgage. A pre-approval letter doesn’t necessarily mean that you have a mortgage outright. Instead, it shows sellers that you’re serious about the home buying process and have good enough credit and income to meet the basic requirements a bank has in place before they give you a mortgage. Getting pre-approved can make it much easier to move quickly on a home you’re interested in, and, with the market moving quickly, any competitive edge you can get is valuable.
4. Do your homework on home pricing.
When you’re actively working on finding the right home, you’ll want to be sure you aren’t overpaying on any property you put a bid on. With mortgage rates at historic loans, it’s a very hot market, which means that some people might be overpricing their homes, thinking they can cash in and make some extra money. Nalula smart price is a tool that makes it easy to see how fairly different properties are priced. This adds a much-needed layer of transparency to the homebuying process. Best of all, Nalula even uses algorithms that give you insight into how likely a seller is to accept an offer, which can be super helpful when it comes to finding a home in your price range that will actually be able to be bought. Any additional information you have in the home buying process is helpful, and with Nalula you don’t have to worry about the accuracy of information—their tools are easy to use and very helpful for first time homeowners trying to get themselves the right price.
5. Know who to call if you have maintenance issues.
In your first year of homeownership, you’re likely to have at least one thing go wrong. Even if your home passed inspection, these things crop up, and it’s important to know who will help you solve these issues in your area. For example, you might want to know who can help repair your pipes if you spring a leak. A local repairman is going to be the best fit, so do your research before problems arise and find a company like Advanced Plumbing Technology. Talking to them ahead of time and forming a relationship can help you avoid panicking in the midst of an emergency and ultimately help you properly care for your home for years to come. You may even want them to come to survey your property after you buy it just to be sure that nothing is hiding underneath the floors that could come back to haunt you if left unchecked.