Four Things to Do to Prepare for a Home Purchase and Mortgage Loan

Four Things to Do to Prepare for a Home Purchase and Mortgage Loan

Are you planning on buying a home soon? If so, take some time to make preparations so you can find out what you can actually afford and get a good interest rate when you make your purchase.

Buying a home is going to be one of the most important decisions you will ever make. Unfortunately, many home buyers take this decision too lightly and they jump into it without taking the proper steps to save money and make an educated purchase. Here are four things you should do to financially prepare for a home purchase so you don’t make an impulse decision that could cost you thousands more than necessary.

1. Reduce Your Debt
Debt is one of the main obstacles to getting decent mortgage rates when you decide to buy a home. If you have credit card debt, medical bills or other consumer debt, put your plans of buying a home on hold until you can at least pay down your debt considerably. Many financial experts suggest that you pay off as much debt as you can before applying for a mortgage as debt-to-income ratio is one of the three main things mortgage lenders evaluate. The lower this ratio at the time you apply for a mortgage, the better risk you are going to be.

2. Make Virtual Payments
Start putting money is savings as soon as possible after paying off your debts. To practice paying a mortgage, you should do this the same time each month. Pretend that you already have a mortgage payment to get accustomed to making your payments on time so you will be well-versed in that when you finally purchase a home. Use this money for your down payment when you find the house you want to buy.

3. Improve Your Credit
One big mistake that first-time home buyers make is not knowing their credit score before applying for a mortgage. You can get free credit scores through various websites and since your credit score is one of the determining factors in getting a mortgage loan, you should know what it is before you apply. There may be things on your report that drag your overall score down, and inaccurate information may cause a lower score than what you should have. Take care of these things and improve your score as much as possible before you apply for a mortgage loan, even if it means postponing your home purchase.  It’s better than getting a high mortgage rate and paying more than you need to over the term of your loan.

4. Visit Open Houses
Many home buyers do not know what homes are worth. That’s why it is important to visit open houses that realtors have. You can see what homes are worth in your area so you can plan your budget accordingly, and avoid waiting until it’s time to buy to find out that you can’t afford a decent-sized home that will accommodate all of your family’s needs.

With the proper preparations, you can make an informed decision rather than an impulse one. There is nothing wrong with taking some extra time to make sure you make a good decision on the most important purchase of your life.

Click here for information on the current mortgage rates in your area.

Image: Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Reviews

  • Susan Massey

    June 25, 2011

    I love the tips thanks a lot. You've given me something really worth while to think about.

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