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What to do if you are going to buy a house in the next six months: 9 steps



To buy a house, it takes about a year to bring finances in full order, experts say. So - if you are planning to buy a new home in the next 6 months (for example, in the spring), you need to start preparing now.

If you start financial planning earlier, you can get more profitable mortgage interest, the newspaper writes The Washington Post. And this - thousands of dollars in savings during loan repayment. People who skip these steps may also miss the home of their dreams or slow down with the purchase. Below is a list of what you should pay attention to when searching for the best deals on the real estate market.

Know your budget

Before you start looking for ads, talk to the lender to see how much you can count on. The borrower will review your overall financial situation (income, assets, and debt) and give you a preliminary assessment letter that shows the possible amount of your mortgage. With this information, you will find out what price range to look for and which areas to look at, says Keith Gambinger, vice president of mortgage information at However, it is worth remembering that this letter does not guarantee a loan. Knowing the size of the loan amount, you can make a decision about what you absolutely need in the house, and without what you can do, says Gambinger.

After receiving the letter, you can calculate other costs.

You need to know what property tax rates are in the area where you want to move.

Evaluate the costs of mortgaging, based on the possible purchase amount, says Ray Rodriguez, regional mortgage manager for TD Bank. (The cost of a mortgage is usually a percentage of the purchase price).

Check your credit history

If you have not checked your credit history in the past year, then now is the time to do it. Consumers get 3 free credit history per year, one from each of the main credit bureaus, on the website Check whether all the loans and bills that are listed on you really belong to you, and whether the balance on the accounts is correct.

If there is an invoice for $ 10 thousand on a credit card that you have paid for a long time, it will be a bad signal.

It may take several months to remove the error from your credit history. So the sooner you check, the more time you have to solve problems before you apply for a mortgage, says Rodriguez.

Maximize your credit score

The higher your credit score, the more likely you are to get a loan at lower interest rates, says Jonathan Smoke, chief economist at the project. Consumers whose credit score is below 625 may have problems getting a mortgage. “If the score is lower, then instead of a loan you can only get a loan counselor,” Smokey says. Consumers whose credit score is higher than 700 can get good interest, but the best offers will go to those who have a credit score higher than 750, according to Smoke.

Your score can be improved if you take a few steps during the months remaining before purchase, experts say.

The first thing you can do is pay your bills on time, since the payment history is the first factor to be considered in a credit score. It will also help you reduce credit card debt to a level no more than 30% of the credit line. It is better to refrain from opening and closing credit cards in preparation for buying a home, says Rodriguez. Applying for a new card usually requires a credit check, which can negatively affect your credit score. Closing a card is also undesirable, since part of your credit history will disappear, and it may seem that you are using a larger share of your total credit limit.

Calculate your first installment

If you are going to buy a house in the near future, you probably have certain savings. In competitive markets, a larger down payment will be your advantage. But do not think that you have to immediately deposit 20%.

If you fall under a certain program (for example, for veterans or those who buy a house for the first time), you may be able to make a smaller down payment.

For example, mortgages supported by Federal Housing Authority, require a down payment of just 3,5%. However, with such loans it is often possible to buy mortgage insurance, because of what the monthly payments are higher. For some loans supported by the US Department of Veterans Affairs, no down payment or mortgage insurance is required at all. photo

Pay for a preliminary check if you know that you will have many competitors - this will allow you to bargain less with the seller and close the deal faster. photo

Create a contingency fund for housing

Most of the future homeowners save money only on the down payment. However, it is equally important to set aside a certain amount of cash for unplanned expenses, such as repairs and other urgent situations. When you buy a house, you will no longer have a homeowner who appears as soon as the tap leaks in the apartment.

Avoid large purchases

When you apply for a mortgage, borrowers can check your bank accounts to make sure you have enough money, says Rodriguez.

Limit your purchases as much as possible for several months before submitting your application so that you have accumulated as much cash as possible.

Big purchases worth thousands of dollars are especially dangerous if you make them with a credit card or consumer credit, the expert says, because they increase your credit load. This can worsen your debt-to-income ratio and, ultimately, reduce the chances of getting a mortgage.

Consider different offers.

Many home buyers agree on the first offer they receive on mortgages, according to a report by the Consumer Financial Protection Bureau. If you do not consider different offers, you can stay on the most expensive loan if you can get cheaper. Start asking for approximate calculations on loans a month and a half before the planned date of buying a house, says Gambinger.

You can ask several companies to calculate a possible mortgage for an interest rate and commissions, the expert says.

Compare interest rates and mortgage rates with different lenders and ask them to lower some of these rates or offer the same as another company. This behavior can save you a lot. For example, if you get a loan worth $ 200 thousand for 0,25% cheaper from the original price, you will save $ 30 thousand for 10 years, Gambinger calculated.

Get a letter of confirmation before watching at home

After you choose a borrower, ask him for a letter with a preliminary confirmation (preapproval letter), which details what loan will be given to you.

Unlike the letter with a preliminary assessment (prequalification letter), a preliminary confirmation suggests that your finances really checked and made sure that you can issue a loan.

Such a document will give you an advantage over other buyers who can not prove that they will receive money. To issue such a letter, the borrower will need to confirm income and check bank records.

Be courteous with the seller

When you are ready to make an offer for a particular house, you may need these tips to gain an advantage over other buyers.

Pay for a preliminary check if you know that you will have many competitors - this will allow you to bargain less with the seller and close the deal faster.

Be flexible in terms of time if this helps the seller. Talk to your broker to find out what else you can do to increase your own chances of getting this house. Sometimes it helps to write a letter explaining your situation and why this house is perfect for you. But do not overdo it. If you began to prepare ahead of time, you are already in a rather advantageous position.

See also:

How much should I earn to buy a house in 27 US cities

10 questions to ask when buying a home in the US

10 best US cities to buy a home

The average price of homes in the largest city of Silicon Valley exceeded one million

Los Angeles banned from building too large houses



mortgage Educational program credit history real estate in the USA buying a home in the US financial planning
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