How to prepare for buying a house
Before buying a home, it may be beneficial for people to review credit scores, gather documentation, prepare a budget and save money.
Buying a house in Massachusetts is a big investment. For many first-time homebuyers, the process is both exciting and stressful. According to Realtor.com, 52 percent of current home buyers are looking to get their first home, which means they may not know how to properly prepare for the purchase.
Learn about credit score
When most people set out to buy a home, they need a mortgage. In order to qualify for a mortgage, the buyer must have a good credit score. It is beneficial for those wanting to buy a home in the near future to start learning about their credit score at least a few months in advance. This will give them time to take steps to improve their current standing if necessary.
As people get ready to make this big purchase, they may want to protect their credit by sticking to the following rules:
- Avoid applying for new loans until the home purchase is finished.
- Reduce debt prior to getting a mortgage by paying down credit cards and car loans.
- Stop putting new purchases on credit cards two months prior to applying for a mortgage.
When a person has a clear understanding of his or her credit score, it will be easier to determine the mortgage he or she may qualify for.
Getting approved for a mortgage requires proof of finances. For this reason, potential buyers may want to start gathering documentation before finding a house they love. People may need to gather W-2s, paystubs, bank statements and the last two tax returns prior to closing on a house.
Set a budget
Before a couple can buy a house, they must understand how much they can afford. According to Money Under 30, house payments should be equal to or less than 30 percent of a household’s gross monthly income. If people spend more than they should on a home, it can become challenging to make ends meet.
Even though the bulk of the money needed to buy a home will come from a mortgage, buyers may still need to have some money on hand during the home-buying process. Someone purchasing a home may need to have money for a down payment and other fees. Most down payments are between 3.5 and 20 percent of the price of the home. The exact percentage depends on the type of loan and the loan provider. Saving a little more than the expected down payment can help those buying a home cover other costs, such as closing and inspection fees.
Massachusetts residents need to know how to prepare for the home buying process. It may be beneficial to work with a lawyer familiar with real estate law when purchasing a property.