What to do before you start your house hunt
House hunting is an exciting experience, and many buyers are eager to jump straight into listings. However, before you ever think about scheduling your first showing, there are a few things you should do. The following are four things that can help every potential buyer before starting a house hunt!
- Get pre-qualified
Getting pre-qualified for a mortgage is the first step buyers should take before they begin seriously house hunting. Not only does this give you a good idea of the mortgage amount you can safely be approved for, but it also helps you begin to get your finances in order. An important part of the pre-approval process in your credit score; monitoring your credit score before you begin searching for a home gives you enough time to make changes to improve it if necessary.
- Create a budget
While your bank may pre-qualify you for a certain amount, it is up to the buyer to create a realistic budget. Compare how much you currently spend on your rent or mortgage to how much you can comfortably afford. Budgeting in advance also allows buyers to figure how additional expenses such as utilities or homeowners association fees will impact their monthly budget.
- Consider additional costs
Homes cost much more than their listing price, and many first time buyers are surprised to find out how much cash they need on closing day. In addition to budgeting for your new monthly mortgage payment, consider how much cash you will need to cover additional costs. Most buyers typically put between 5-20% in cash towards a down payment, but paying less than 20% may require you to purchase private mortgage insurance. Likewise, be prepared to cover closing costs in cash, which are often up to 3% of the mortgage amount.
- Make a list of must-haves
While house hunting can be exciting, looking at multiple properties in a short period of time can leave your head spinning. To stay focused on what you really need in a new home, make a list of your must-haves, needs, wants, and deal breakers. Not only can this help you quickly eliminate listings that do not match your criteria, but it can also be a useful reference tool for your realtor to ensure they are showing you properties that meet your needs.