What You Need to Know When Buying a Home
Buying a home is the biggest financial commitment that most people will make in their lives, so it is important to do it right. Whether you are a first time home buyer or a seasoned pro, there are some tips you should follow to make sure you get the home of your dreams and don’t wind up in a nightmare.
Check Your Credit Score
Most people need a mortgage to buy a home, and to get the best deal on a loan, you need to have a good credit score. Before you even start the process of looking to buy a home, you should make sure your credit score is in good shape. Get a copy of your credit report and promptly correct any errors you find there. To get the best interest rate on a home loan, you will need to have a credit score somewhere in the 720-750 range on the FICO scale, depending on the lender. If your credit score is lower, you can expect to pay a higher rate, which can easily mean tens of thousands of additional dollars in finance costs over the life of your loan. If your score is lower than what is ideal, you might want to put your home-buying plans on hold for a while and try to improve your score.
Even with a good credit score, qualifying for a mortgage isn’t the easiest process, so it’s best not to wait until you find a home to attempt to qualify for a home loan. Getting a loan pre-approval carries several benefits. It gives you a good idea of what you can afford and it also can put buyers at ease because they know that since you have a pre-approval, you should not have any trouble getting financing, so it can make them more likely to accept your offer.
Work With a Real Estate Agent
It is traditional for sellers to pay all real estate commissions, both to their agent and to a buyer’s agent, so you have absolutely nothing to lose and everything to gain by working with a real estate agent. An agent can do all the work for you, such as finding homes that fit your criteria and setting appointments for showings. A real estate agent also can help you with making an offer and negotiating with sellers as well as taking your through the closing process.
Account for All Costs
Most people who are looking to buy a home get fixated on their loan payment and how much they can afford. But you have to keep in mind that’s not the only cost. Most lenders only quote you what the principal and interest cost will be. You have to account for your homeowners insurance, property taxes and mortgage insurance if you do not make a big enough down payment. All of that will be added to your monthly payment. You also have to figure in closing costs, which usually cost about 2 percent of your loan amount. One more thing to keep in mind is ongoing maintenance and repair costs, such as lawn care or fixing an appliance that breaks.