Buying or selling a home is probably one of the largest financial transactions you'll ever make. It's important to be well-prepared before purchasing or selling a home or investment property. To help you figure that out, here's an all-in-one first-time home buyer checklist with everything you should make sure you have covered before you set off on your hunt—or, if not, consider this a prime opportunity to get started.
Step No. 1: Find a real estate agent
Most rookie home buyers begin their house search online by browsing listings, which, normally is a mistake for a couple of reasons.
First you might be looking for homes that is outside your price range and of course you don’t want to fall in love in a property that you can’t afford. Most importantly: It’s the beginning of your own quest when you should be letting a seasoned professional guide you through every step of the home-buying process. Big Bonus is it’s no cost to you as a buyer to use an agent, so you’re getting free advice by using a real estate agent—no strings attached.
Step No. 2: Talk to a mortgage lender
Some experts recommend buyers to talk to a mortgage lender before finding a real estate agent. You need to shop for a lender locally, and real estate agents know which local lenders are trustworthy and which aren’t.
Ask your agent for two to three lender recommendations. Talking to some lenders will help you fully assess your financing options with no obligation to pick until you find what’s right for you.
A loan pre-approval sets you up for a smooth home buying experience. Pre-approvals don’t take much time. They involve pulling a three-bureau credit report (called a tri-merge) that shows your credit score and credit history as reported by third-party, respected institutions. Within the credit report, a lender can see your payment history (to see if payment obligations have been on-time and in-full) and your lines of credit (past and present).
The goal is to get pre-approved for a home loan. For you to get pre-approved, you’ll need to provide the lender a sufficient amount of paperwork, including your bank statements, pay stubs, W-2 forms, 1099 forms, and tax returns. If the lender approves it, you’ll receive a loan estimate that you would qualify for and the interest rate that you get.
Step No. 3: Improve your credit (if needed)
If you have a low credit rating, rest assured there are several things you can do to start improving your score today:
· Register on the electoral roll: if your name’s not on there, you’ll find it much harder to get credit.
· Check for mistakes on your file: even having just a slightly wrong address can have an impact on your score. So, make sure you check all the details and report any incorrect information immediately.
· Pay your bills on time: paying on time a phone landline or internet contract, is a great way to prove to lenders that you’re capable to managing finances effectively.
· Check if you are linked to another person: as having a spouse, friend or family member’s credit rating linked to yours through a joint account, could affect your personal rating if they have a poor score.
· Check for fraudulent activity: if something on your credit report is incorrect or doesn’t apply to you – i.e. if someone applied for credit in your name without your knowledge, contact the credit reference agency immediately to have your file updated.
· County Court Judgements (CCJs): receiving any court judgements for debt, will have a serious impact on your credit score. If you’re having problems keeping up with payments, seek debt advice.
· High levels of existing debt: ideally you should eliminate any outstanding debt before applying for new credit. As banks, building societies and credit card companies might be hesitant about lending you more if you already have a lot of existing debt.
· Moving home a lot: lenders feel more comfortable if they see evidence that you have lived at one address for a considerable period. Be sure to bear this in mind.
If you find that your credit score is subpar, you may be able to take steps to boost your score. Just keep in mind that you won’t improve a credit score overnight. Indeed, you may need to postpone your house search for a few months in order to mend your credit.
Step No. 4: Determine where you want to live
To focus your house hunting, you’ll need to decide where do you want to settle down. If you don’t have any particular neighborhood in mind, think about the area that you wanted to stay within or what areas are best suited for your commuting needs, school requirements, close to your family or friends or nearby restaurant and overall lifestyle.
Ask this to yourself: Where do you want to live? What do you do at night? What do you do on weekends? Your habits can help determine where should you live.
Step No. 5: Don’t damage your credit
If you thought only credit cards and loans affect your credit score, you were wrong. Certain applications or late payments can hurt your credit score even if you don’t regularly do business with that company.
Your loan will not get fully approved until it goes to the underwriting – which could take place just a few days before closing. To keep your credit score stable, you'll want to avoid taking on new debt (e.g., getting an auto loan), opening new credit cards, neglecting student loan payments, or falling behind on credit card payments.
There are many benefits of having a good credit score, like enjoying a lower interest rate on your credit cards and loans. A good credit score also allows you to save money on insurance and security deposits on new utilities and cell phone service. It's all about how you use credit that lets you to keep a good score.