Home Buying: The Before

This was originally posted on Coldwell Banker Elite.

So you’re finally ready to buy your own home, congrats! It’s a big decision that can really impact your life and your finances. Here are our top five things to do before you take the leap to make sure you’re completely prepared!

Strengthen your credit score

Don’t know your credit score? If you’re thinking about buying a home in the near future—it’s time to find out! Try CreditKarma or any of the free credit reports to see what you may need to work on or if you’re in good shape! The better your credit score, the less you’ll need to pay for your home loan. The quickest way to improve your score is to pay down any credit card balances! You’ll also want to avoid applying for credit, for example, opening a new credit card or getting a car loan, until after you’ve closed on your new home!

Figure out what you can afford

Now’s the time to face the facts and be realistic. What’s your actual budget for purchasing a home? Conventional wisdom says that home expenses should only take up around 30-33% of your income each year. What will your monthly mortgage payment be, including interest, mortgage insurance and any HOA fees? An easy way to figure out what you can afford is by using Zillow’s Mortgage Calculator—easily adjust your purchase price vs down payment and see how it can affect your monthly payment. You’ll also want to set aside an emergency fund for unexpected repairs—especially during your first year! Once you’ve figured out what price range you can comfortably afford, stick to only looking at homes in that range.

Research different neighborhoods

You know your desired price range and what kind of home you’re looking for—now ’s the time to do your homework! Different areas and neighborhoods have their own character, benefits and drawbacks—consult your Realtor, websites like Niche, Crimemapping and Yelp, and if possible, drive through any neighborhoods you’re seriously considering at various times of day to really get a feel for them.

Save up

Keep in mind that the down payment is only  one part of the costs you’ll need to pay upfront. Once you cough up that 10% down payment, you’ll still need to pay for any closing costs, necessary inspections, repairs or maintenance costs, the first few months of mortgage and insurance payments, and any moving costs. Closing costs can run anywhere from 2-5% of the asking price while typical home inspections are around $350-500. That’s on top of your down payment! With all that in mind, is your dream home still within your housing budget of 30-33% of your yearly income?

Connect with a lender

An experienced loan officer can be a huge help during your preparation period! They’ll help you figure out what loan product will be best for you and what you can do to improve your credit. Your CBE agent can recommend plenty of ed and once you’ve got your pre-approval letter, you’re ready to tour homes and make an offer!

Buying a home (whether it’s your first or not!) is an exciting experience and can be immensely rewarding! All of us at CBE wish you the best of luck finding your dream home–don’t hesitate to reach out if you need help along the way!