Anyone who has ever dreamed of being a homeowner imagines the time when they are able to walk through open houses, look through MLS listings for homes, and start decorating each room of their new house. But anyone who has ever been through the process of actually buying a home knows that the home-buying process isn’t quite that simple. Sure, anyone can walk into an open house, but to actually make a serious offer on a home, there are a few steps that need to be followed.
At Twin City Real Estate Services, our real estate agents are dedicated to helping first-time homebuyers find the home of their dreams. From the very beginning of the process all the way to closing, we offer personalized guidance and expertise so that no stone is left unturned. When you’re buying a home with our help, you can be confident that you’re getting the best deal on your new home. But before we help you look through listing after listing, here are some tips to get the process started on your end.
Pull Your Credit Report
Before you can buy a house, it’s very important that you are preapproved (more on this later); and in order to be preapproved, you need to show a bank that your finances are secure enough to be able to afford the mortgage. This is done with your credit report and credit score. Your mortgage rate will depend on this information (a higher score tends to mean a lower interest rate). When you have your full report, you can look for areas of improvement that may be necessary. You can do things like pay off credit card debt, consider consolidating your debt, and try to keep your utilization below 30 percent.
Create a Budget
This can be especially important if your credit score is lower than your real estate agent or lender recommend. If your debt-to-income (DTI) ratio is too high — how much debt you have (rent, car loan, credit card payments) compared to how much income you earn each month — creating a budget will help improve this percentage. A 36 percent DTI or below is a good number to shoot for and 15 percent or less is even better, but you only need 43 percent to meet the minimum requirements for a qualified mortgage. If you’re in the 30 to 40 percent range, an improvement in this ratio will look good to any potential lenders.
Save for a Down Payment
Creating a budget will also help you grow a solid down payment. When you’re able to save and put more money down on the cost of the house, your monthly payments will be lower. You can do things like eat out less, skip the two-week vacation to Mexico, and pay off all of your credit card debt. The money freed up from paying down debt can go toward your down payment fund.
When you feel comfortable with your credit score and/or DTI, you can go to a bank and ask to be preapproved for a mortgage. When you’re serious about starting the process of buying a home, this is an essential step. Not only will seller’s agents take you seriously when you want to make an offer on a home, this may give you an advantage over other potential buyers.
And don’t just get prequalified, it’s not as thorough a qualification as being fully preapproved is. Being prequalified simply means that the bank has looked over the financial information that you provided the lender. Actually being preapproved involves completing a mortgage application and the lender pulling your credit report for a more thorough look into your finances.
With information such as monthly income, debt, credit history, and tax returns, your lender will determine how much money you have to shop with. Having this information will prevent you from looking at $350,000 homes if you’re only approved for $250,000. There’s nothing more frustrating for homebuyers and real estate agents alike when you’ve spent weeks or months looking at houses above your means.
Find a Real Estate Agent
Even though it’s possible to go through the home buying process without an agent, it is immensely beneficial to have the experience and knowledge of a real estate professional. They will be able to schedule showings, help you write up an offer, negotiate the offer, process paperwork, and so much more. If you’re looking for an agent in the Minneapolis area, contact the team at Twin City Real Estate Services.
Get an Inspection
Don’t fool yourself into thinking that you could save $500 to $1,000 when you skip the inspection. A professional home inspector will look for issues with the roof, plumbing, electrical, the foundation, and more. You may have a keen eye for signs of issues with the home, but it takes a professional to know exactly what to look for. If the inspection report does show major issues, it can be your way out of purchasing a home with structural damage, or seller repairs can be negotiated into the contract. And in some cases, a home sale can’t be completed without one.
Buying a home is a wonderful experience, but it can take a lot of preparation before the process can actually be started. If you have any questions or want to learn more, contact a real estate agent at Twin City Real Estate Services. We can’t wait to help you find your dream home.