The home buying season – typically Spring to early Fall – will be upon us shortly, and if you are in the market for a new home – either as a first-time buyer or seasoned veteran – there are some steps you need to take now to financially prepare. Many people get caught up in just finding the right home without doing the legwork needed to ensure a smooth and swift purchase. Here are a few tips to get you ready for those three lovely words – “Clear to Close”.
- Check your Credit Score. This step should always be the first step whenever you are looking to borrow money. Your FICO Score is one of the first things that any lender is going to look at followed by what’s actually listed on your credit report. Make sure all of your information is accurate, and look to repair any negative marks as quickly as possible. The better your score, the better your interest rate, the more money you save in the long run and easier it is to secure a loan.
- Don’t open any new accounts. Whether it’s a new credit card or a new auto loan, resist the urge to open any new accounts until after you close on your new home. Incurring any new debt or hard inquiries on your credit report could cause your FICO score to take a hit.
- Save, Save, Save. Start saving for that down payment. Having at least 20% down will save you money so you don’t have to pay PMI – private mortgage insurance. This could save you thousands over the course of your loan!
- Interview Real Estate Agents. Referrals are great especially if they are from trusted friends and family, but do your due diligence and meet with a few agents before you settle on one. You want to make sure the agent is knowledgeable about the area you are looking in. If you are also selling a current house, you want to make sure they are familiar with the area you are moving from as well.
- Keep tabs on interest rates. If you hear that interest rates are at historic lows or that interest rates are on the rise, you should not assume that you can get the rock-bottom rate. Not everyone gets the same interest rate on a mortgage loan. It depends on your financial picture. Litchfield Bancorp’s rates are published right on our website, so you can easily monitor them – CLICK HERE!
- Find a mortgage lender. Before you even start getting those MLS listings (and yes, we even mean browsing online listings), you should find a mortgage lender who can help you figure out if you can even afford to buy a home. There is no point in wasting your time or your realtor’s time if it’s now financially feasible. Be sure to look at what they offer, costs, points, and how long to close. Don’t discount your local community bank. They know your name, can be reached directly, and are less likely to sell your mortgages to those big banks!
- Get pre-approved! After you find your lender, provide them with your financial information include W2’s, paystubs, tax returns, etc. They can let you know how much you can afford and the amount of money needed for a down payment and closing costs.
The steps above will provide you with a solid guideline on how best to prepare to purchase your new home. From organizing your finances to save money to finding a real estate agent and mortgage lender, there is plenty to keep you busy! If you have any questions about the lending process or how Litchfield Bancorp can help you in your quest for your dream home – give us a call or stop into any of our branches.
Vice President, Senior Mortgage Lender
NMLS MLO ID: 532621