If you have reached the point where you would like to start building equity in a home you own verus helping your landlord build equity in the home you are renting, there are some important steps you will need to take before you start the house hunting process so that you know you are in a great position to make an offer when you do find that perfect home. I have listed the steps below; the first two are for those planning on getting a mortgage.
1) Check your credit score. Have you checked your credit score lately? It’s a good idea to check what your 3 scores are (top reporting bureaus are Experian, Transunion and Equifax) which can be done through multiple sites on the internet; just make sure the 3 scores are from those bureaus. The better your credit, the more likely you are to be approved for a mortgage and the better interest rate you may receive. If your score is low, there are things you can do to improve it. Look at your report and make sure everything on it is accurate. See if there is anything outstanding that you can take care of now. Lenders want to see that you pay your bills and that you pay them on time. It’s ok to have multiple credit cards but if they are all maxed out, that is going to lower your score. See if you can pay off some of your balances first before applying for a mortgage. The mid 700’s or higher is considered a good score by lenders.
2) Know how much you can afford – speak with a mortgage lender. For those who plan to borrow money to buy a home, it is imperative that you speak with a mortgage lender before you begin your home search so you know how much you can afford to purchase. It’s important you find a lender you can trust, has a good reputation, offers good interest rates, and provides superior customer service. Speak with your family and friends to see who they used when they bought their home or check with the bank you do your banking with to see if they offer mortgages to their customers. I also have worked with many great lenders who have offered superior service to my clients so I can offer recommendations as well. Once you find a lender you are comfortable with, they will discuss your finances, run your credit report, discuss interest rates and different types of mortgages they offer and most importantly will let you know if you have been preapproved for a mortgage and for how much. They will give you a preapproval letter which will need to accompany your offer when you find a home you want to purchase to show the sellers that you are qualified to purchase their home.
3) Are you paying cash in full? If so, great! Just be prepared you will need to provide proof of funds when you present your offer to prove to the seller that you have the cash in an account in your name to pay for the home at closing. A copy of a bank statement(s) showing the balance with the account number crossed out is sufficient.
4) Find a real estate agent - preferably a buyer's agent. Buying a home is a one of the biggest financial investments you will make and therefore finding the right agent to guide you through this process is key. I love working with first time buyers and that is the kind of agent you want to work with. (See my previous blog – Why I Love Working with First Time Buyers). I have seen many first time buyers call the listing agent directly to see a property they are interested in because they don’t have an agent yet and that seems like the right way to go about it. Though it is fine to call the listing agent directly, keep in mind that the listing agent for that property also represents the seller and therefore will be a disclosed dual agent which means they will be representing both the seller and the buyer. Because of that, they have to be neutral with both parties. They cannot give you advice on how much you should offer on the house for instance. They can show you the comparable sales but cannot comment on them or offer you an opinion on them. If you are working with a buyer’s agent instead – which I advise - that agent will be representing you and you only. So they can give advice about your offer, they can show you the comparable sales and let you know how the home you like is priced in relation to those sales. Also when you have a buyer’s agent, they will do the leg work for you, finding homes that meet your criteria, make all the appointments for you, and even may know of properties that are about to hit the market but haven’t yet, so can see if before anyone else does.
There are the steps I advise all my clients who tell me they are ready to buy a home. If you or someone you know is looking to purchase a home, please reach out to me! I would be thrilled to help.
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