You can’t just swipe a credit card and buy a house. It’s not that simple.

A home is one of the biggest purchases you’ll ever make. Taking out a mortgage requires a great deal of preparation and paperwork. If you plan on buying a home in 2017, this is the perfect time to prepare.

Here are the five ways to make sure you’re ready when the time comes to pull the trigger.

 

Check Your Credit Score

Your credit score is one of the biggest determining factors in getting approved for a loan. Your history of both borrowing and repaying money serve as indicators of how trustworthy you are as a borrower. Credit scores range from 300 to 850. The higher the score the better. Typically, to secure the best interest rate possible, you’ll need a score of 740 or higher.

 

Improve Your Credit Score

If your credit score isn’t as high as you’d like – take a close look at your credit report. Are there any errors? If so, correcting these could significantly raise your score.

Do you pay your bills in full and on time? If not, start now. Improving your history of payment can help raise your score.

Additionally, ask your credit card company to raise your limit. This proof of trust can raise your score. But, be sure you don’t max out your card each month. It’s best to use 30% or less of your total available credit.

 

Save for Your Down Payment

In addition to qualifying for a mortgage, you’ll need a pretty penny to buy a home. This chunk of cash will cover things like your down payment, closing costs and moving expenses. You’ll also be well served to have some money set aside for unexpected repairs and expenses.

Take a look at your monthly budget and begin setting aside as much as you can. To supplement this amount, you might consider asking family and friends for financial gifts during the holidays.

Word to the Wise: You can use a gift to make a down payment, but you can’t use an unsecured loan. If you plan to purchase your home within two bank statements of the time you deposit your gift (or gifts), you’ll need to have a signed copy of the check and a letter of explanation signed by you and the giver.

 

Find a Real Estate Agent You Trust

In most cases, finding the perfect home doesn’t happen overnight. You’ll spend countless days and evenings with your real estate agent walking through homes for sale, looking at comps (comparable purchases in the area), and signing offers.

You’ll want to work with someone who you get along with. Your real estate agent should be someone who is willing to listen and understand what you’re looking for. And, you want your realtor to be willing to go above and beyond to get your offer completed and submitted on time. In today’s competitive market, getting your offer in as early as possible plays a huge role in whether or not it’s accepted.

 

Find a Lender and Get Preapproved

Like your realtor, your lender needs to be someone you’ll trust. And, he or she needs to be someone who can get your loan request processed and approved on time.

Your lender will also help you set a realistic budget. Before you start house hunting, they’ll walk through the preapproval processes with you. You’ll typically submit a variety of documents, including:

  • Tax returns for the past two years
  • W-2 and 1099 forms for the past two years
  • Paycheck stubs from the past few months
  • Proof of mortgage or rent payments for the past year
  • A list of all your debts, including credit cards, student loans, auto loans, and alimony
  • A list of all your assets, including bank statements, auto titles, real estate, and any investment accounts

Ready to start the preapproval process? Contact me today.

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