A home is one of the biggest purchases most people will buy during their lifetime. If you live in the Houston area and are considering buying a home, it’s best to know the process and create a plan. Listed below are a few tips to make the home-buying process easier.
Know Your Credit Score
When applying for a mortgage, the first thing a lender will do is pull your credit report. The three-digit number will play a large role in whether you get an approval. Prior to applying and getting a pre-approval, it’s essential to review your credit report to see if there are any discrepancies.
There are other factors that can lower your credit score such as the debt-to-income ratio, late payments and applying for many credit cards. You can contact the three credit reporting agencies to get a free copy.
Minimizing Debt
If you have several credit cards with high balances, it can cause your credit score to be much lower. Since the debt-to-income ratio has the greatest impact on your score it’s necessary to reduce your debt prior to applying for a mortgage from a lender. Paying off one at a time or applying for a consolidation loan are two options.
Established Savings
Buying a home comes with many expenses. Depending on your price range, the down payment alone can be beyond $50,000 if you put the bank-preferred 20% down. While most lenders will accept 5% or 10%, if you pay less, they will add Private Mortgage Insurance (PMI). This can add a few hundred more to the monthly mortgage payment. To avoid the extra fee, open a credit union savings account and start saving money well before you start the home-buying process.
The Pre-Approval
The next step after getting your credit score where you want it is to gain a pre-approval from the lender. This will let you know the price range of a home you qualify for. Otherwise, you’ll look for homes with a Realtor and fall in love with one you can’t afford. Lenders determine the pre-approval amount based on your credit score and total annual income. Not all lenders will produce the same results, so shop the mortgage with a few.
Closing Costs
There are many fees due at closing. Title insurance, bank appraisal, school, town and property taxes, homeowner’s insurance and attorney fees are a few. As stated earlier, if you put less than 20% as the down payment you can also expect to pay several hundred for PMI. If you want to gain access to a lower interest rate, you may also need to pay points at the time of closing to secure the rate.
Maintaining the Home
When shopping for a home in the Houston area, you need to factor in costs throughout the year for annual maintenance. If you buy an older home because the price is favorable, consider that you’ll need to spend money on updates. It’s also in your best interest to ask questions when looking at a home regarding the age of the plumbing, roof and windows and doors. These are costly items to replace. A home inspection will reveal many of these concerns and well worth the expense.
Real Estate Agent
All real estate agents are not the same. Find one that matches your personality and one with a sound reputation. While the bank doesn’t require you to have one, they will be the one standing in your corner offering valuable information on the quality of schools, safety, and whether the home is worth the price.
Buying a home is a lengthy and sometimes hectic process. However, if you plan in advance, you can make the home-buying process easier.
