Fridays with the Fiddle Fig: First Steps to Buying a Home
This week's topic: The First Steps to Buying a Home
I get this questions a lot from potential buyers. Besides picking your realtor, arguably the most important, is picking your lender. Before starting to look for a home it is important to be pre approved for a home loan. Here are 4 big reasons why that is so important.
1. You will get an accurate number for what you can afford. With access to technology you can have an idea of what you can afford but the pre approval process will give you hard numbers. This prevents you from looking at $500k homes when you can only afford $400k. Or on the flip side you may only think you can afford $500k when in reality you can afford $600k. By knowing these numbers it helps set expectations and ensures you are looking at the right properties.
2. Get your credit run. This is so important because although you may think your credit is impeccable and you have never been late on a payment, something as small as an unpaid parking ticket can reduce your credit score by 100 points or more. By having your credit run you can be ahead of any unknown issues and work to resolve them to stay on track with your home buying goals.
3. You will figure out what type of loan program works best for you. There are many different types of loan programs and all sorts of down payment structures. You can barrow the entire amount of the home purchase (with a VA loan) to as little as 5-10% of the total purchase value. It all depends. Figuring this out upfront helps you plan in the event that you need to move money from retirement accounts or get gifts from family for the downpayment.
4. It’s the time to put a mini financial plan in place. Buying a home is typically one of the largest financial purchases a person can make in their life. Its important to spend the time to look at the big picture. How this will affect your taxes, your monthly savings, and your monthly living expenses. All of this is important to understand before buying a home.
Being pre approved for a home loan is the foundation of your home search. Your realtor uses these numbers to help you plan and search for a home. If they are incorrect then you may be looking at the wrong properties.
If you are thinking about buying and want to talk to a lender about getting pre approved message us or leave a comment and we would love to connect you with a great lender!