Preparing to Buy Your Next Home

Even with the craziness of the past year, plenty of people are looking to purchase a home. Homeownership is a prize worth seeking but it can seem overwhelming for anyone going through this process for the first time. Even if buying a home is a long-term goal for you, there are some things you can (and should) focus on right now to get prepared to buy your next home. 

Credit Score

One of the first things potential homebuyers should work on is their credit score. Your credit score will be the determining factor on whether or not you’ll qualify for a home loan and how much you’ll pay (over time) in interest. If you haven’t already, check your credit scores with the big three companies: Experian, TransUnion and Equifax. Ideally, your score will be at least 620 for a conventional loan. The better your score, the better you can negotiate the deal.

Down Payment

While there are ways to purchase a home today without a down payment, it is rarely worth it in the long run. If you know that a home purchase is in your future, start saving for your down payment today. This payment could run anywhere between 3.5% and 20% of the total purchase of the home. Don’t forget you’ll need money for the closing process as well. Do your research and pack away whatever you can so you’re prepared with the big day finally arrives.

Homeowners Inspection Process

Often, people forget about the home inspection process until they are already underway and seeking a contract. This means homebuyers could be at the mercy of their realtor’s recommendation for a quality home inspection company. It doesn’t have to be that way. Consumer Reports has put together an extensive guide for finding a quality inspector at a fair price. Being proactive, rather than reactive, could save you both stress and money when purchasing your next home.

Homeowners Insurance

Another thing you’ll need to have is homeowners insurance. Once you start the closing process, your lender will require that you purchase a policy. Do some research into this process, including what your policy should cover, what your possible liabilities might be, and the different types of coverage available. Investopedia has a good guide as a place to start.

Research HOA’s

Most new homes (and many existing neighborhoods) come with a mandatory HOA. When you invest in a home in an HOA community, you are automatically a part of that organization whether you like it or not. This includes dues, fees, and fines. It’s best to know what you are getting into before signing the dotted line so look into the standard HOA and be sure to request and read through all the requirements and guidelines of your new neighborhood before closing if you can. An HOA can be great but it’s important to know what you are joining to avoid any frustration later.

Obtaining a Mortgage Loan

Speaking of being proactive rather than reactive, a lot hinges on the company you pick to process your mortgage loan. Don’t wait until the last minute to figure this out. Getting a pre-approval will make the home buying process much easier and could keep you from missing out in the negotiation process.

Don’t get overwhelmed. Tackle each of these steps one at a time and you’ll be over-prepared when closing day arrives.

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