Owning a home, as opposed to renting, has many benefits. However, exciting as it might be, this can turn somewhat stressful – buying a home is among the largest expenses you are likely to make. Having a checklist can help you with many different aspects of life and purchasing property is no exception. A pre-purchasing checklist will help you in terms of being better prepared and knowing exactly what to expect in the buying process.
Define what you’re looking for
Sit down and make a list of requirements for your future home – what exactly are you looking for? Proximity to work? Low noise pollution? A large backyard? Focus on your priorities and cross off offers that are below your standard. This will help you find a perfect home. Now, all that is left is researching neighborhoods and visiting open houses, which is actually easier than you think and comes with a number of benefits – but only if you know what you’re looking for.
Plan your move
Once you’ve defined your needs and found the perfect home for you and your family, you need to plan your move there. This might seem like a premature step in the entire process, especially if you’re still unsure how you’re going to pay for it. But, thinking ahead and planning things in advance can go a really long way when you’re buying a house and have little or no experience in this area. After all long distance moving isn’t something you can do out of the blue.
You can do it on your own if you’re well organized and have reliable help, but it’s usually best left to professionals. However, asking friends to help you pack, research moving companies, and organize the trip, is recommended, as it can significantly lighten your load.
Check your credit score
Whatever you are intending on buying, the first thing that you need to get familiarized with is how much you are able/willing to spend. When it comes to buying property, things are a bit more complicated – you probably don’t have the sufficient amount of cash lying around for buying yourself a home, which is why you are probably going to need to get a loan. Lenders base your loan eligibility on your credit score and that means you’ll be eligible to buy only certain properties. Luckily, getting your credit report is free and each of the three major credit bureaus are obligated to supply you with it once per year.
What about your down payment?
The majority of mortgages require at least a 20% down payment and, if you are able to make this kind of payment, your loan costs will be much more forgiving and allow you to get a significantly better interest rate. Of course, many people aren’t able to pay up the full 20%, which is the bread and butter of programs such as FHA, which offers loans with a staggeringly low down payment of only 3.5%! Naturally, these types of programs make for significantly higher monthly payments, which is exactly why you need to tackle down payment as a part of your pre-purchasing checklist. All the professionals are going to advise you to use one of those financial calculators, which will allow you to plan your mortgage efficiently, so be sure to take that idea into consideration as well.
Get ready for a ton of paperwork
Expect that your bank will require a lot of paperwork – they are really particular about mortgage loans. Here’s a list of documents that you’ll most likely need:
- W-2 forms or business tax return forms if self-employed for the last 2 to 3 years.
- Most recent pay stubs
- Bank statements
- All loan and credit card statements
- Addresses accounting your residence(s) within the past 5 to 7 years
- Personal tax returns for the past two to three years
- Brokerage account statements within the last quarter of the year
- Retirement statements, such as 401(k)
Getting pre-approved for your loan
Before getting approved for your mortgage, you need to get pre-approved; and now is the time to get in contact with your lenders and buyers’ agents. Your paperwork should all be in order by now, so this isn’t likely to cause you any big problems; however, make sure that you bring all your documents, regardless of who you are going to meet with
This concludes the basics that your pre-purchasing checklist should consist of. Get introduced to your credit rating and figure out how much you are willing/able to spend early in the game and find your perfect lender, based on your financial situation. Finally, always have your paperwork in order and bring it to every scheduled meeting – better be safe than sorry!