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Buying a house is innately stressful. After all, a home is likely the single most expensive purchase you will ever make–and it can come with a 30-year payment schedule. That’s a lot to commit to. When you are already stressed about signing on the dotted line, the last thing you want is a stack of last-minute paperwork that could mean go ahead or denied when you sit down to close. Here are some tips for getting ready before you put in an offer.
A low credit score might not prevent you from financing a house, but it will often mean that the cost of financing is a lot higher. Even a single percentage point means a lot of money when you are talking about a purchase the size of a house. Before you start looking at real estate, take a look at your credit score. If it isn’t at the top of the range, you’ll want to talk with lenders about what you can do to improve. Some lenders might hand you a list of things to accomplish, while others will just tell you to raise your score to a minimum number. You may consider looking into a reputable credit repair company if your score really needs work.
Yes, you can buy a house with zero down, but you shouldn’t. When you can’t put 20 percent down on a house, you’ll likely need to carry insurance on your mortgage loan. That makes the cost of the loan even higher. Saving up that 20 percent might be difficult, but the long term savings make it more than worthwhile. You may wish to consider refinancing student loans in order to free up some cash for savings.
For a short term loan, small differences in the interest rate don’t add up to much, but for a home loan, you really want to shop. Don’t just look for the lowest interest rate. Some mortgage lenders offer a very low rate but at a premium in points. For example, you can buy down the rate by adding points. If you have the upfront capital, paying points may be more cost effective in the long run. Do the math and check the cost of your financing before you decide on a lender.
Sometimes, you may be eligible for tax credits or deductions when you buy a home. Specific neighborhoods may offer reduced property taxes for a set time period, or you may be able to get energy efficiency credits. Talk with your financial adviser to get all of the details about possible tax breaks that go along with property ownership. If you do your taxes yourself, you may wish to use one of the best online tax services in order to properly claim all deductions.
If you do the leg work ahead of time, closing can be relatively stress free and direct. Making the commitment is tough enough, there is no reason to add to your stress with uncertainty about your lender.