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    What Should I Do Now to Get Ready to Buy a Home?

    What Should I Do Now to Get Ready to Buy a Home?

    Whether you are three months, six months or a year away from being ready to buy a home, these six steps will help you make smart decisions about your biggest purchase so you can be confident that you’re purchasing the best home at a price you can afford with the most favorable financing.

    Buying a home is a huge and often complicated undertaking. Information for home buyers is not always easily accessible, unbiased or targeted for diverse audiences. As Realtors, we have the ability to connect you to the resources you need to be empowered and informed consumers and we are committed to dedicating our time and resources to provide quality services from the very start of your new adventure.

    1. Decide how much home you can afford

    Generally, you can afford a home priced 2 to 3 times your gross income. Remember to consider costs every homeowner must cover: property taxes, insurance, maintenance, utilities, and association fees, if applicable, as well as costs specific to your family, such as day care, transportation and education.

    2. Get your credit in order

    A credit report details your borrowing history, including any late payments and debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 for a mortgage.

    You’re entitled to free copies of your credit reports annually from the major credit bureaus: Equifax, Experian, and TransUnion. Order and then pore over them to ensure the information is accurate, and try to correct any errors before you buy. The easiest ways to improve your credit score is to pay every bill on time and pay down high credit card debt.  From now on, everything you buy is a must buy, not a want to buy. If you can live without it, forget about it.

    3. Start saving

    Start saving enough money to qualify for a mortgage and cover your down payment. Ideally, you should have 20% of the purchase price set aside for a down payment, but some lenders allow as little as 3% down. A small down payment preserves your savings for emergencies. However, the lower your down payment, the higher the loan amount you’ll need to qualify for, and if you still qualify, the higher your monthly payment will be. Your down payment size can also influence your interest rate and the type of loan you can get and whether you will be required to purchase private mortgage insurance which can add hundreds to your monthly payment.

    There are many mortgage and down payment assistance programs available to home buyers in the District of Columbia and Maryland. Contact us for more information.  

    4. Ask about all the costs

    A down payment is just one home buying cost. There are other costs buyers commonly pay including home inspections, title insurance, settlement fees, transfer fees and recordation fees which can total between 3% to 6% of the home price. Tally up the extras you’ll also want to buy after you move-in, such as paint, window coverings, furniture or items for a new yard.

    5. Get prequalified

    Meet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements. Contact us if you would like us to put you in touch with a reputable lender.

    6. Attend homeownership counseling

    There are many local non-profit organizations which provide one-on-one pre-purchase homeownership counseling. Staff works with you on improving credit, developing a budget, shopping for a mortgage, understanding the steps and professionals involved in buying a home, how to negotiate a contract, understanding the closing process, and learning how to maintain a home and budget after becoming a homeowner. Contact us to receive a list of the non-profit organizations providing homeownership counseling in the District of Columbia and Maryland.

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