7 Things You Should Do Before Investing In a Home

Great news! Your small business income is steady, and you’re ready to purchase a home. It might be a home you want to live in yourself or a second home for an investment property. Regardless of the reason for your move, here are seven things that you should consider doing prior to investing in a home.

1. Improve your credit score.

Your credit score plays an important part in the determination as to how much you are able to borrow to purchase a home. If your intention is to move in a few months-time, you have that time available to clean up your credit score. Get your credit report free of charge from Experian, Equifax, or TransUnion, and be sure that there are no mistakes. If there are any errors, get in touch with your creditors to make the change/s, then ask them to update the credit bureaus straight after.

2. Avoid hefty credit card debt.

Be sure that you’re not snowed under with credit card debt. Quit the spending, and think about utilizing a balance transfer credit card as a way of reducing your credit card debt more quickly. Making an improvement to your current credit will boost your credit score, making you a more attractive option to potential lenders.

And then there’s the extra advantage of managing your credit cards effectively so that your mortgage payments are easier to manage.

3. Reduce monthly payments.

If your loan and credit card payments make for a large percentage of your overall monthly payments, it will likely adversely impact the chances of you obtaining a mortgage loan offer that’s attractive. By taking steps to reduce your monthly payments, you’ll be in a healthier financial position to get a mortgage, while also reducing the stress of meeting your monthly mortgage repayments every month.

4. Be precise as to what you want.

You’ll possibly never make a bigger purchase than your home, so you should have a clear concept as to what it is you really want before starting your search. Though you should seek preapproval early on in the process, you shouldn’t await the preapproval offer as a way to narrow your search. You should determine the non-negotiables and what they will be with respect to your new home and what it is you might be willing to make some compromises on.

Take some time to list down the features, the style of home, and the floor plan that you particularly like. What sort of neighborhood would you like to live in? Are there any other key details you should make a note of? It is also worthy to note the long term implications of this investment by making sure that there will be an ease in transferring this property when you decide to pass it down to your children or any other future generations. Should the need arise, one convenient way of transferring properties is by preparing a quitclaim deed. Making a comprehensive list of what it is you would like and what are must-haves should also make it easier when you begin looking at homes for sale.

5. Get preapproved.

When you begin visiting open houses as part of your home buying search, it’s an exciting time. Nevertheless, it’s a wise idea to keep your preapproval letter safely in your pocket while conducting your search. The preapproval letter will inform you as to how much you’re able to afford and this will make life easier in terms of narrowing your search.

With the preapproval letter to hand, you’ll also gain some negotiating power when you are dealing with home sellers. It will enhance your chances of having any offer you make accepted if you have a letter that states you are in a strong financial position from which to purchase a home.

6. Make a commitment to a savings plan.

When you’re thinking about moving, it’s time to reorganize the budget and generate a savings plan in terms of making the down payment, dealing with the closing costs and also the moving costs.

If you’re in a position to make a more sizable down payment, you might save money on the mortgage payments over the longer run, which also makes you a more attractive proposition for a lender. Furthermore, if you’re a first-time buyer, consider the use of a down payment assistance program, if available to you.

7. Set the budgeting parameters.

You might have been preapproved for a particular amount, but there’s no rule that states you cannot set your own budget which is less than the preapproved amount.

Doing this can allow you more confidence in terms of your finances, and can free up more cash for any discretionary expenses. You might wish to have more money available for other matters, so you should adjust your budgeting limits in order to suit your lifestyle.