Before you buy a home, there are many things you should consider that could save you money. Purchasing a home is a very large investment and takes a lot of preparation, so you’ll want to make the smartest decisions possible.
Check your credit report
Consumer Financial Protection Bureau recommends checking your credit before purchasing a home. You may have forgotten about an old credit card and defaulted on payments, which could negatively impact your credit score. You may also detect inaccuracies, which can take time to dispute. Make sure your credit score is high enough to qualify for a loan at a low interest rate. Visit AnnualCreditReport.com to view your free credit report. If your credit is not where it needs to be, you will want to improve your score.
Get preapproved for a mortgage loan
This is an important step in the process because some Realtors will not work with you otherwise. Find a mortgage loan officer at your financial institution to see what mortgage loan programs they have to offer.
Chose the right real estate agent
Using a real estate agent is recommended, especially for first-time homebuyers. The home buying process can be long, daunting and requires a lot of paperwork. Realtors can make the process a lot easier and ensure all items are completed legally and timely.
Find a home that fits your budget
Home expenses should not break the bank. Be realistic with what you are comfortable spending on your monthly mortgage loan. Also keep in mind the additional costs of insurance, taxes, homeowner’s association fees, maintenance, electric and water bills, etc. Figure out what you can afford, and be willing to walk away from a property that you cannot afford. Use a mortgage loan calculator to get an idea of what your monthly payments would be if you bought today. Include taxes and home insurance in your cost.
Calculate your closing costs
They can add up quickly. Homebuyers in Hawaii can expect to pay between 3 and 5 percent of the purchase price of the home. Closing costs include the lenders fees, title, settlement fees, taxes, prepaid items such as homeowners insurance or Homeowners Association Fees.
Get an inspection
A home inspection may cost a couple hundred dollars upfront, but could save you thousands in the long run. A home inspector may find issues with your future home like plumbing, wiring, etc. An inspection is a very wise investment.
Gather important documents
Collect pay stubs, bank account statements, W-2s, tax returns for the past two years, statements from current loans and credit lines, and names and addresses of your landlords for the past two years. This can save the lender time.
Purchasing a home is one of the biggest and most exciting financial decisions you can make. While the home buying journey can seem complicated, rest assured you are not alone. To help you avoid some of the common mistakes first-time homebuyers often make, be sure to talk with a lender and use the many free resources that are available online. The more you educate yourself on the home buying process, the more confidence you will have in making a smart financial decision.
Need more guidance, or ready to apply? Reach out to one of our Mortgage Loan Officers today.
