Buying a home is a journey: here's how to get going on the right foot
- Make sure your credit score is on point: Experian (one of the three main credit reporting agencies) can help you check, manage, track and protect your score
- Keep a keen eye out for unauthorized uses of your credit while you're looking for homes: LifeLock can help keep you safe from identity theft
- Get pre-approved for a mortgage: Quicken Loans' Rocket Mortgage can get you pre-approved online fast
- Are you further along in the process and ready to buy a home? Home Savi can help you easily create and submit offers online and save like never before—learn more
1) Check and repair your credit
When applying for a mortgage, your credit score is what largely determines how much a bank or lender will lend you, as well as what the interest rate on your loan will be. For this reason, you want your credit score to be as high as possible before you buy a home. If you haven't checked your credit score in a while, don't worry, there are plenty of online tools (such as Experian) that can help you check, manage, track and protect your score. Unsure what a good credit score is? The general credit brackets are listed below:
If your score isn't where it needs to be, take time before looking for homes to fix your score. Dealing with charge-offs, addressing late payments and using credit strategically are all ways to repair your credit score.
2) Safeguard your credit
Once you've put in all the hard work to get your credit where it needs to be, make sure someone doesn't ruin it. It's important to monitor your score like a hawk, not open any new accounts and keep your overall financial situation nice and stable. Services such as LifeLock can help monitor your credit, protect against data breaches as well as proactively guard against other forms of identity theft. Identity theft is a bigger threat than you may think. According to Nasdaq, 31.8 million US consumers had their credit cards breached in 2014—more than three times the 2013 number. This figure is only bound to rise in the coming years.
3) Get pre-approved
Being pre-approved for a mortgage means that a lender has reviewed your credit history and will likely approve you for a home loan. This pre-approval will tell you how much the bank is willing to lend you, as well as how much time you have to accept their offer. Getting pre-approved for a mortgage will help you greatly in the home search and negotiation process. Quicken Loans' Rocket Mortgage can help you get pre-approved online without the hassle and paperwork of the traditional pre-approval process.
There are multiple advantages to being pre-approved for a loan including:
Identifies a realistic home cost
Being pre-approved will allow you to know exactly how much you can borrow. This will save you time by identifying which homes you can afford and which are outside of your budget.
Improves your image as a buyer
Being pre-approved shows the seller that you're a serious buyer and not simply a person looking around. It also tells the seller that you're capable of affording the home and that your offer probably won’t fall through due to lack of funding.
Saves you time
Applying and getting approved for a mortgage takes time. If you get it out of the way before making an offer, it'll speed up the purchasing process allowing you to seal the deal before another competing buyer has time to throw their hat into the ring.
Enhances your negotiating power
Pre-approved buyers have an advantage over buyers that are not pre-approved. The seller is more likely to accept your offer, even if another offer is slightly higher in price. That’s because being pre-approved shows financial certainty. You can still negotiate for better terms or better pricing.
Once you've completed these steps, you're ready to start looking for homes seriously. Naturally, you're going to look online, so read about how online estimates are good, but can be misleading.