If you’re thinking about buying a home in 2018, November and December are the perfect time to “warm up” for the house hunt so you can hit the ground running in the new year. No matter where you’re looking for a home, the prep work is relatively the same. From organizing your finances to save money to finding a real estate agent and mortgage lender, Trulia offers seven steps prospective home buyers should take to be ready to buy a house in 2018.
1. Check your credit score
A credit score is a numerical representation of your credit report. FICO scores range from 300 to 850, and the higher your score, the better. Typically, you’ll get the best interest rate on a loan if your score is 740 and above. If your credit score falls short, get busy repairing it. Correct any errors that might be on your report, start paying all your bills on time and get your credit limit raised. Note, however, that you shouldn’t max out your card each month. It’s best to use 30 percent or less of your total available credit.
2. Don’t open new credit cards
Turning down every offer to open a credit card can be difficult, especially if it could help you save 20 percent or more on your holiday purchases. Tempting as saving at checkout can be, opening new credit may hurt your chances of getting a mortgage, or at least of getting the best rate on a loan. Opening an account means you have created an additional line of credit, which could change the numbers and jeopardize the application. What could save you a few dollars now could cost you far more in the long run if your mortgage payments will be higher. And, along those same lines, try not to overspend on impulse purchases during the holiday season.
3. Suggest financial gifts for the holidays
Besides the mortgage loan, you’ll need a sizable amount of cash to buy a house. There’s the down payment to consider, along with closing and moving costs, and unexpected repairs and costs. Rather than incurring thousands in unexpected costs during the mortgage process, bulk up on your emergency fund. Rather than receiving gifts for the holidays, prospective homebuyers can suggest cash instead to put toward their home. And, remember, you might be getting some money back after you file your tax return. Use it for a down payment rather than blowing it on a vacation.
4. Interview potential real estate agents
If your neighbor, relative or friend of a friend happens to know (or is) a real estate agent, that’s great. This person might be the ideal agent for you. But you owe it to yourself to shop around. Be sure to seek out an agent who is knowledgeable, good, integral and can assist you in reaching the goal of homeownership. The end of the year typically is a slow time for agents, so chances are they’ll be more accommodating to making an appointment based on your schedule.
5. Keep tabs on interest rates
If you hear that interest rates are at historic lows or on the rise, you should not assume that you can get the rock-bottom rate. Not everyone gets the same interest rate on a mortgage loan. It depends on your financial picture and on the lender you choose. Homebuyers should shop around for the lowest interest rates. Note that closing costs also can vary, so discuss ways that you can keep yours down with your real estate agent.
6. Find a mortgage lender
Before you even start looking for a home, be sure to find a mortgage lender to determine if you can afford to buy a home. If you can’t right now, there’s no use torturing yourself by finding your dream home that’s just out of reach. Once you’ve found a lender, look at what they offer, costs, points and how long it takes to close. After you know how much home you can afford, perform your home search based on your preapproval amount or less.
7. Get preapproved
When a lender gives your financials the once-over and preapproves you for a mortgage, you’ll be able to show sellers that you really can buy their house. But how do you get preapproved? By preparing a few documents, which you can do several months in advance of the actual purchase. Here’s what you need to buy a house.
• Tax returns for the past two years
• W-2 forms for the past two years
• Paycheck stubs from the past few months
• Proof of mortgage or rent payments for the past year
• A list of all your debts, including credit cards, student loans, auto loans and alimony
• A list of all your assets, including bank statements, auto titles, real estate and any investment accounts