10 Things to do Before Buying a Home

Here’s ten steps that you’ll want to take before buying a home. No need to tell you that this may be the one of the largest purchases you’ll be making in your life time. It is critical that you prepare and do some initial research. The more you work on these preliminary steps the easier and smoother the home buying process will go.

1. Study the home buying process.
Do some homework and learn the home buying process in advance. Home buying lingo may be new to you, so be sure to read through a few home-buying glossaries, especially the mortgage terms.

2. Obtain your credit report.
Mortgage lenders will review your credit, you should do the same. Get a copy of your credit report and review it for errors. Check everything from the administrative information to the credit history. You can get copies from all three credit bureaus at once by visiting www.AnnualCreditReport.com.

3. Fix credit errors.
If you find an error on your credit report, go to the company's website where the report came from. It can take time to clean up an erroneous credit report, so get started as soon as you see an error.

4. Check your debt-to-income ratio.
Check your debt-to-income ratio. Mortgage lenders prefer your overall debt to be no more than 20% of your net monthly income. If your debt is more, pay it down as quickly as possible before applying for a mortgage loan. If you do, you'll have an easier qualification process and will likely qualify for a better rate.

5. Determine your budget.
Use an online mortgage calculator to get an idea how various mortgage amounts translate into monthly payments. This will give you a budget to work from, and eliminate the homes that are beyond your means.

6. Start saving cash.
This is one of the best things you can do before starting the home buying process, for a couple of reasons. Mortgage lenders like to see that you have some cash reserves on hand, and you'll need some dollars if unexpected fees or costs that might arise.

7. Get pre-approved for a loan.
Pre-qualification is an informal review of your finances by a mortgage lender. During pre-approval, a mortgage lender will review your credit, finances, debt and conditionally determine a certain amount of mortgage. Sellers will take you more seriously if you have a pre-approval letter, and the process also helps identify any problems with your credit or other qualifying factors.

8. Avoid new lines of credit.
Avoid new lines of credit. Don't sign up for new credit cards or make any large credit purchases while you're "under review" by a mortgage lender. Try to keep your financial situation as stable and favorable as possible. It's a good idea to pay down some debt and to save up some cash.

9. Validate the price.
It's called an "asking price" for a good reason. In real estate there's room to negotiate. So don't accept an asking price as being reasonable until you validate it through careful research. Compare it to recent sales in the area. Your agent should be expert at this.

10. Get a home inspection.
A house is a sizable investment, and the last thing you want is to discover problems after you've taken ownership. Home inspections are very affordable, and well worth the nominal fee.