Prepare to Buy a New Home this Year
Are you getting ready to buy a new home? You’ll need to get your finances in shape, know how to get your best deal on a mortgage, and figure out where, within your budget, you want to live. Start now and then spring into action when you find “the one.”
Price range and downpayment. Most banks and online real estate sites have affordability and mortgage calculators that can help you figure out what you can afford.
Work out your own price range based on what the calculators say. Do those monthly payments look reasonable or like a stretch? Do you expect your monthly expenses to rise, maybe because of a planned car purchase? How long do you expect to stay in this house? Is it worth a bit of a stretch because you plan to stay more than five to seven years? Or would you be more comfortable keeping payments at a lower level?
To determine how much you’ll have for a downpayment, assess what you have in hand and what you can realistically save between now and when you purchase. Don’t forget there will be closing costs. Downpayment calculators will show how much you need for each downpayment percentage required for different types of mortgage.
Neighborhood. Start to figure out where, within your budget, would suit you in the ways most important to you — schools, ease of commute, housing density, amenities. Which factors are most important, which are more open to compromise?
Mortgage. Check out mortgage rates at various lenders. If you’re not ready to apply for a mortgage yet, you won’t get specific quotes. But many lenders post approximate rates online, and you can browse them regularly so that you get to know the lay of the land.
A month or so before you’re hoping to buy, start shopping for a mortgage. Ask for quotes on rates and closing fees from several lenders. Once you identify the mortgage company, get a pre-approval letter from the lender. With that in hand, you’ll be able to show that you’re a good prospect as a buyer.