Buying a house is an exciting part of life. However, purchasing a home takes a considerable amount of time, work, and money. Understanding the requirements is important to your success. Whether you’re embarking on this journey soon or just preparing for the future, it’s helpful to know what the process entails. Here are the six steps to take before you are ready for a mortgage.
1. The Budget
Consider how much money you’re going to be investing in your new home. This varies greatly from person to person and is influenced by factors such as household income and savings. If you know that you want a specific type of house, then you should be prepared to pay that cost. If you don’t have a specific style of house in mind, then you’ll have more options that can fit your budget.
2. The Search
Once you have a general idea of how much you can afford, you can narrow your home search and start looking for homes that are in your price range. You can browse real estate websites, such as realtor.com or zillow.com, to get a sense of current housing prices. You can also look at trends to see what houses are selling for in your target area.
There is nothing wrong with purchasing a home that isn’t perfect. Not many people are fortunate enough to purchase their forever-house on the first try. While you’re house shopping, fit your expectations to your budget and work with what you have. Don’t settle for a house that is too expensive, or one that you are not comfortable living in for a long time. The housing market is prone to volatility, so you might not be able to sell your home for a profit. Be prepared to live in any house you buy.
3. The Credit
To acquire a mortgage, a solid credit score is essential. Get a copy of your credit report before you apply for a mortgage. You can review your report for any errors and work on resolving them. If your credit score needs improvement, try to pay down any outstanding balances and avoid taking out any additional credit before applying for a mortgage. You can access your credit report for free annually on annualcreditreport.com
You can monitor your credit any time you log into the Main Street Bank mobile app with Credit Score. And to further protect your credit, learn what actions you can take.
4. The Savings
An essential part of buying a home is the down payment. A mortgage down payment is usually 20% of the price of a home, but that number can be adjusted depending on your unique circumstances. The more cash you put down for your home, the less you’ll need to borrow. You will also need to ensure you have adequate funds to pay for closing costs and to cover any unexpected expenses you might encounter, such as home repairs. A mortgage calculator can help you understand important parameters, such as projected payoff dates and monthly costs.
5. The Pre-approval
As you draw closer to the time you are ready to purchase a home, consider getting pre-approved by a lender. With a pre-approval, a lender will verify your income and creditworthiness. Specifically, they will require you to verify your income and assets by providing them with W2s and financial statements. Lenders will also verify your employment and check your credit to determine if you qualify for a pre-approval.
A pre-approval is a valuable negotiating tool. It lets home sellers know that you are qualified to obtain a mortgage, and that you are actively seeking a new home. They will know that a deal with you has a strong chance of success, and that you will be able to close quickly.
Developing a business relationship with a lender is a great way to get started.
6. The Mortgage
Just as you need to shop for the right home, you need to search for the right mortgage. Carefully compare rates and fees, but don’t fall under the spell of an inexpensive deal. Choose a lender and financial institution that you trust and enjoy working with. Buying a home requires significant cooperation between all parties, so you want to make sure you like working with your lender before you’re stuck with them.
At Main Street Bank, we have a strong mortgage lending department that highly values customer service. Our dedicated mortgage team is skilled at helping homebuyers through the entire process, from pre-approval, closing the deal, and beyond. Feel free to explore our Mortgage department in more detail right on our website. If you decide it’s a good fit, you can start the mortgage process online or in-person all to your preference.
Main Street Bank offers online mortgage applications so that you can get started from anywhere.
Purchasing your first home is no small task. Fortunately, after you understand the requirements and expectations, you’ll have a good idea of what you are signing up for. Don’t let the paperwork cloud your enthusiasm. With thorough preparation and a good lender at your side, you are equipped for your first house hunting adventure.
Follow us on social media where we share financial content daily.