Steps to Prepare to Buy a Home
8210 James Franklin Street, set to finish construction in May or June, is a four-bedroom home in Northwest Houston. The new owners will enjoy luxury finishes and a large fenced-in yard!
So, you’ve decided to buy a house. Congratulations! There are so many benefits to owning a home in Houston. If you’re like most buyers, you may be asking yourself what you can do to speed up the process to make your dream a reality sooner. Every buyer has their own individual goals and steps to cover on their real estate journey, but this list is a great start in making sure that you’re on track for home ownership.
Check Your Credit Score
Credit scores range from 300 to 850, and every mortgage program has its own minimum credit score requirements. Typically, the minimums hover around 640 – in the “fair” range. If your credit score is lower, you might have some trouble getting approved by a lender. Check your credit report for free to detect problems as soon as you can. The sooner in the process you can complete this critical step, the better off you’ll be. Not only will you save time during the process of getting approved for a mortgage, you could save money too! By finding and fixing errors on your credit report, you could earn yourself a better interest rate.
Don’t forget: If you’re purchasing a home with someone else, their score matters too. Buying a home is a team effort! You will each have to investigate potential issues with your credit and come up with a game plan for remedying them. This could be as simple as making a few requests to remove inaccurate items. Depending on the score value, it could also mean dropping the home search to focus on working to improve their credit score.
Buying your first home is even sweeter when you’ve taken the time to sort out your credit report!
I Have No Debt. Do I Have a Credit Score?
Young first-time homebuyers may not have any debt to report to receive a credit score. If this describes you, great work on minimizing debt! However, just be aware that potential lenders may be a little nervous about giving money to someone who has no history of paying lent money back. This leaves many early-process buyers feeling like they have to make the odd choice of acquiring debt when they have the money to pay. The truth is that once you develop a credit history, your score doesn’t shoot straight to 850. It takes time, among other things, to grow. Luckily, you don’t need to take on uncomfortable levels of debt to improve your credit score.
If you see a home in your future in the next five to ten years, consider revolving credit. Simply opening a credit card and charging necessities like groceries and gas can boost your credit score. Look for cards with no annual fees that boast perks like cash back or travel rewards, and always pay the balance in full to avoid racking up costly interest fees.
Evaluate Your Employment
Is your employment or income stable? The bank will want to know this before granting you a loan. Savings can dwindle fast, so simply having padding in your bank account isn’t enough to satisfy lenders. You need a reliable and stable income source with which you can pay your mortgage. If you’re in between jobs, struggling to maintain consistency in your business, or planning to go through a major job change during the lending process, know that you might get some pushback from a mortgage lender. Regardless of your situation, make sure that you have tax documentation from the past couple of years ready just in case your lender asks for it. They likely will!
Get Prequalified and Preapproved for a Loan
Prequalification and preapproval differ, but you can typically get prequalified early in your home-buying journey. When you prequalify, you receive an estimate of what you might be able to borrow based on your finances and a credit check. You might be surprised by what you learn. It’s good to get prequalified early on so you can fully understand what kind of work you must put into your finances to move onto other steps in the process. Lenders will also educate you about your options, and it’s always useful to have that knowledge at the outset.
Preapproval is as close as you can get to a lender approving you for a mortgage without actually signing a purchase contract. Once you complete a mortgage application, the lender will verify any information you provide, perform a credit check, and send you a preapproval letter if approved. The offer letter will expire after a set amount of time, so keep an eye on that date if you need to ask for an extension! If you’re not quite ready to get preapproved, you can save some time for yourself by getting paperwork together now.
The closing is an exciting day for buyers! After completing all the prep work that comes with buying a home, buyers often sigh with relief once the papers are signed.
Save Up For a Down Payment and Closing Costs
Even if preapproved for a loan, buyers still need to have some cash stashed away. Be prepared to have a down payment ready as well as money for closing costs. It comes as a surprise to many buyers that closing costs can add up to between 3% and 8% of the home’s selling price. If you purchase a $500,000 home, that’s $15,000 in closing costs at minimum. And that’s on top of whatever you choose to put down on the home. Some lenders will allow buyers to roll closing costs into a mortgage to ease the initial financial burden of such fees. However, this will increase what you pay on your monthly mortgage. Remember: You will also pay interest on those closing costs if you roll them into a mortgage!
The more money you save, the better off you will be. This goes double for times when the buyers’ market is competitive.
Solidify Your Wants vs. Needs
You might really want a pool, gazebo, wraparound front porch, or alleyway access, but do you need it? In a hot real estate market with little available inventory, homes with in-demand features don’t stay on the market for long, and they frequently sell above asking price. However, if you can compromise on a few things, you’ll be in a much better position. Today, many buyers are focused on how they can make their new home the one they’ve always dreamed about. Buyers committed to purchasing in up-and-coming neighborhoods often see high appreciation values as a result of their sacrifices, too!
Talk to a Realtor®
No matter what stage of the homebuying process you’re in, the absolute best thing you can do is talk to a Realtor®. I will guide you through each step of the buying process, leverage my knowledge of Houston neighborhoods to let you know what to expect when buying a home in the city, and keep in touch with you about new homes that enter the market so you can move on them fast. When you spot the home of your dreams, it always helps to have a seasoned Realtor® by your side!
Have questions about how to prepare to buy a home? Send me a message or call me at 713.398.8719. I’m happy to help!
FEATURED HOME
This stunning 3-bedroom, 2.5-bathroom Craftsman home in the Heights offers 2,428 square
feet of pristine living space. The new owners will enjoy beautiful hardwoods, upgraded lighting,
and new crown moldings in the open-concept living area, and a dedicated office space will offer
space and privacy to get work done. The modern kitchen is equipped with stainless steel
appliances, a five-burner cooktop, a new pantry with pull-out storage and custom cabinetry,
and upgraded lighting. The luxurious primary bathroom has been completely renovated with
quartz vanities with custom-built cabinetry, a beautifully-tiled rain shower, and a free-standing
jetted tub. This property has a fantastic side yard perfect for entertaining and plenty of room
for a pool.
Contact Judith Holmes at 713.822.8201 to see for yourself how extraordinary 417 East 25th
Street is!
