Things to do before buying a home

Maybe you’ve decided to take the plunge and buy your first home, or you’re already a homeowner and are ready to move into a new place. Whatever reason prompted the move, here are seven things you need to do before buying a home.

1. Clean up your credit score. Your credit score will be reviewed by lenders, and it plays an important role in determining how much house you can buy. If you know you won’t be moving into a new house for at least six to eight months, you have plenty of time to do some legwork to clean up your credit. Order your free credit report from Equifax, TransUnion or Experian, and make sure it is free of any mistakes. If you do find an error, contact creditors to make sure everything is up-to-date, and have them send corrections to the credit bureaus as soon as possible.

2. Kick the credit card habit. Another step to cleaning up your credit history? Make sure you aren’t buried under credit card debt. Take steps to stop credit card spending, and consider using a balance-transfer credit card to reduce your debt load faster. Improving your credit will give your credit score a boost, and that will make you more attractive to lenders. A bonus? Kicking the credit card habit can help you get a handle on your finances so making mortgage payments isn’t overwhelming.

3. Hash out monthly payments. If credit card and loan payments make up a big percentage of your monthly payments, you may reduce your chances of getting an attractive mortgage loan offer. Taking steps to lower monthly payments can put you in a better financial position for a mortgage and also reduce some of the stress of making that mortgage payment each month.

4. Define exactly what you want. Your home is one of the biggest purchases you will ever make, and you need to have a clear idea of exactly what you are looking for before you begin the search. While you should get preapproved early in the process, don’t wait for the preapproval offer to narrow down the search. You need to determine what the non-negotiables are for your future home and what you are willing to compromise on. Take the time to list what features, floor plans and style of home you are most interested in; what type of neighborhood you want to live in; and other key details. A comprehensive list of wants and must-haves can make it easier to shop for a home and compare different properties during the search.

5. Get preapproved. It’s exciting to start the homebuying process by visiting open houses, but it’s a good idea to have a preapproval letter in your pocket before you set foot in your dream home. Your preapproval letter will tell you how much you can really afford and make it easier to narrow down your search. Having that preapproval letter will also give you some negotiating power when you start working with sellers – you’ll have a greater chance of having an offer accepted when you have a letter stating that you are in a financial position to buy the home.

6. Commit to a savings plan. When you start thinking about moving, take the time to reorganize your budget and put together a savings plan for the down payment, closing costs and moving costs. Putting yourself in a position to make a larger down payment can save you money on mortgage payments in the long run and make you more attractive to the lender. Also, if you’re a first-time homebuyer, don’t overlook down payment assistance programs, if they exist in your area.

7. Set your own budget parameters. Even though you may be preapproved for a certain amount, there’s no rule that says you can’t set your own budget that’s less than your preapproval amount. Doing so can give you more confidence with your finances and may free up more money for discretionary expenses. Whether you want to have more money to travel or prefer to live with a higher disposable income, adjust your budget limits to suit your lifestyle.

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