If you’re thinking about buying a home at some point this year, there are a few things you should know before you begin shopping.
Here are six mistakes you can easily avoid by acting before you want to buy.
1. Know your credit score.
If you’re planning to buy a home at any point in the future, you should know your credit score with the three major bureaus – Equifax, Experian and TransUnion. You want your credit score to be close to (or, even better, over) 700 if possible. If your score is lower, that could have a major impact on your rate, the dollar amount you can get approved for, and even your eligibility to get a loan at all!
2. Know the full payment amount.
Many people consider only the principle amount when trying to determine the mortgage they can afford, but there are a number of other factors that go into a house payment. Interest is part of every payment, and, if you (or your lender) prefer escrow, your taxes and insurance will be included in the monthly payment amount as well. You should factor in all four of these pieces when considering the real payment amount you can afford.
3. Have enough money available.
Lenders will want to see that you have enough money saved (also known as reserves) before approving a loan. Some borrowers think they can move money into their account a couple days before closing; that is rarely the case. Make sure any assets you have are in the right accounts a few months before applying for a loan.
4. Shop around.
Different lenders offer different loan programs and, in many cases, have different rates available. You should feel comfortable not only with the loan you receive, but also with the lender that gives you the mortgage.
5. Lock your rate.
Rates can change from one day to the next, so it’s crucial as a borrower that you lock up the best rate possible as soon as you’re ready to buy. Staying in regular communication with your lender is the best way to make sure you’re getting the best rate possible.
6. Know what you’re signing.
Loan documents are long, and it’s easy as a borrower to sign where you’re told and assume you know everything in the package. It’s your responsibility as the borrower to now what you’re signing; have someone you trust, perhaps an attorney, read the documents with you before signing.