“What do I need to buy a house?” is a great question to ask yourself at the beginning of the property transfer process.
Once you decide that you need to move, be it for a new job opportunity, to be closer to your children, or maybe even to make room for an expanding family, there are a few things you always need to have in your toolkit.
What Do I Need to Buy a House in 2018 (Ultimate Checklist)
Here’s what you need to have handy in order to purchase a home:
A Good Credit Score
Having a good credit score is an essential part of becoming a homeowner. Credit scores range from 300 to 850. The higher your score, the better your credit. For example, the typical minimum credit score for mortgage applications sits between 620 and 680. If you would like to score a killer deal on your mortgage, your credit score should be above 740.
Because of this, you should always be working on building up your credit score. An easy way to do this is by paying your bills (especially your credit card bill!) on time each month. You should also do your best not to max out your credit accounts each month, nor should you constantly be opening new accounts, as this can bring your score down.
Knowledge of Interest Rates
Once you have locked in a good credit score, the next thing you need to buy a house in 2018 is a working knowledge of current mortgage interest rates. It is important to shop around and find the mortgage with the best interest rate based on your income and credit score.
This is because housing loans are often 30-year commitments, so even if the rate you secure is only 1% lower annually than your other options, it is going to save you a lot of money in the long term. Mortgage rates, much like the prices of the homes they pay for, are negotiable, so you don’t need to accept the first offer that comes along if you think you can do better.
A Nice Down Payment
The current average down payment size for first-time homebuyers is between 5% and 10% of the home’s final sales price; however, if you are purchasing your second or subsequent home, there is a possibility that it could be higher, simply because you have had more time to save. You can typically get the best terms and rates on a mortgage with a down payment of at least 20%.
If you have saved less than 20% for your down payment, you might be required to purchase private mortgage insurance (sometimes called PMI), which is something that protects the lender in case you default on your home loan.
An Excellent Lender
When you are shopping for a mortgage, solid interest rates should not be the only thing you examine about a particular lender. You want to make sure that you are working with a company that you can trust.
Be sure to read reviews left by others who have their mortgage with the lender you are interested in and ask as the loan officers as many questions as you need to in order to feel confident in your choice.
A Preapproval Letter
A mortgage preapproval letter is different than a mortgage prequalification letter. This is an important difference to understand because most sellers prefer to work with you if you have a preapproval letter.
To get a pre-approval letter you need to let your lender know about
- Your income
- Credit history
- Current debt
- The size of your down payment
You will also need to provide your lender with your
- Driver’s license
- Social Security card
- The last 2 months of bank statements
- Most recent 30 days of pay stubs
- Past 2 years of W-2s
- Most recent 2 years of federal tax returns
The preapproval process can take anywhere from a few days to a few months. The reason for this is that certain applicants have extenuating circumstances, like being self-employed, divorced, or previously bankrupt, that might need more investigating.
A Realistic Budget and Expectations
Once you have built up your credit, saved for your down payment, and received your mortgage pre-approval letter, the next thing you need to buy a house is a realistic budget.
Your lender essentially sets your budget when he preapproves you for a mortgage, as the offer is a finite amount; however, your expectations also need to be realistic for the local market. Knowing what you can get for your budget will significantly reduce the amount of stress you are under during the process.
A Trustworthy Real Estate Agent
One of the most important things that you need to buy a house in 2018 is a real estate agent that you can trust. You want to partner with an agent whose personality is a good fit for yours. One that can answer all of your questions about the property transfer process and assuage any concerns you may have.
You want to work with a professional agent that has good connections in the local market and experience in the kind of property deals you are interested in making.
And, most of all, you want to work with an agent that is interested in getting you the best deal on your dream home, not one who is just after a sizeable commission.
Patience and Tenacity
Buying a house is like going to war.
You are going to need patience and tenacity to survive. Patience as you prepare the necessary documents, interview lenders and Realtors and embark on the search for your perfect home. Tenacity so that you don’t become disheartened by setbacks, like loan rejections or bidding wars. They are all a part of the process. You have to remember to push through!
Looking for the perfect partner to help you buy a house this year? If you’re in the market for an excellent full-service realtor who charges a flat rate rather than a crazy high commission, why not work with Clever? Call us today at 1-833-2-CLEVER or fill out our online form to get started.