5 things you should do before you buy a home

Five Things You Should Do Before You Buy a Home

Buying a home can be a stressful and confusing time for many homebuyers.

But it does not have it be. Five simple things you should do before you buy a home.

One of the first things you should do when you are considering buying a home is to
know your credit score.

Tip Number One: Get Your Credit Report and Scores for Free

To get a home loan there are several factors that come into play, but your FICO or
credit score is the most important. You can check your credit report and get your scores
online for free. The Fair Credit Reporting Act requires each of the nationwide credit
reporting companies Equifax, Experian, and TransUnion to provide you with a free
copy of your credit report, at your request, once every 12 months. Once you have your
credit report be sure to review it and check for any errors.

Tip Number Two: Look for Errors on Your Credit Report

Mistakes on credit reports are bigger issues than you may realize. If you do find
inaccuracies, you can dispute them with the three major credit bureaus. They have 30
days to investigate your dispute. If they find that the item in question is inaccurate, they
will correct it.

The higher the credit score the more likely you are to get approved for a home loan, so
check what you can do to improve your score.
Tip Number Three: Improve Your Score Before Applying

A few points difference in your credit score can be the difference in whether you qualify
for a home loan or not. There are a few things you can do to increase your scores.

First, pay down the balances on your credit cards. Your credit utilization ratio is your
credit limit divided by your card balance. This ratio accounts for 30% of your overall
credit score, only payment history has a bigger impact. For example, if your credit limit
is $10,000 and your balance is $6,000 your utilization ratio is 60% which is remarkably
high. The lower your credit card balances are the higher your credit rating will be. Some
credit experts advise keeping your balances below 20% of your credit card limit.

The next thing you can do is to make all your payments on time. 35% of your credit
score is based on your payment history so it’s important to pay all your bills on time. If
you’re a forgetful person you can set up auto pay with your creditors, so you never miss
a payment.

If you are wanting to buy a home, do not apply for, or open any new credit. This means
to hold off on buying a new car or opening a credit card until after you close on your

Tip Number Four: Check Your Savings

You will need a certain amount of cash in the bank to buy a home. If you are living
paycheck to paycheck then it probably is not the ideal time for you to apply for a loan.
There are more upfront costs associated with getting a mortgage loan besides the down
payment. There are closing costs and fees that you will need to pay to the appraiser,
lender and title company, so you need to make sure you have enough cash on hand
when you get ready to close. And one of the most important things you should do
before you go out looking for a home is to get preapproved.

Tip Number Five: Get PreApproved

A preapproval means you have completed a mortgage application and a mortgage
lender has checked credit and verified income and assets. You will need to submit
documentation verifying your income, assets and savings and your lender will be able to
help you through this process. Most sellers today will not even consider an offer from a
buyer who has not already been preapproved, so plan on meeting with your mortgage
lender before you go shopping for your home.

Buying a new home is exciting and there are a few simple things you can do before you
start looking that will help you through the process.