Here at The Lending Group, we'd like to talk about the five things to do before buying a home. For many of us, the process of loan financing can seem stressful and confusing, but it really shouldn't be. Below, there are five simple steps that will help make sure your experience is smooth, quick, and - most importantly - favorable.
Pull Your Free Credit Report
In order to tackle your debt, the first thing on your list should be a simple review of your credit report. Credit reports are available for free from three major credit bureaus - Experian, Equifax, and TransUnion. There are other free services that can provide a copy of your credit report as well (such as Credit Karma).
Analyze All Aspects of Your Finances
As our second step, one of the best things you can do is to make sure that there are no errors throwing up red flags on your report. Stay on top of your credit to make sure that there are no erroneous charges, collections, or public records. If you notice an error or inaccuracy in your report, make sure to contact the lender or another organization so they can correct it as soon as possible.
Third, you should check your savings to make sure that all the money you might need for a down payment is there. This could be in your checking or savings account, 401k (or if someone gives you a gift), etc. Just make sure it's ready and waiting as needed.
There are a few tips and tricks to consider for the fourth step. If you see that your credit score isn't what it could be, you’ll want to address the issues right away. The easiest way you can improve your credit history quickly is by paying down the debt on your existing credit cards. Touch base with those who are close to the limit or maxed out to bring the balances as close to 30% utilization as possible. For example, if you have a card with a limit of $1000, and at its max, try to make a payment and bring it down to around $300 (30%). And within 30 days, sometimes even sooner, your score will instantly increase.
A Pre-Approval Letter is Key
The fifth, and most important, step is getting a pre-qualification for lending. Reach out to your trusted local real estate lender to initiate the process of getting your pre-approval letter. They'll review your income documents, savings/checking account statements, credit scores, etc. The goal here is to make sure you're 100% approved and that everything is clear and accurate before starting to shop. This will also let you know exactly how much money is available for this purchase, which is crucial.
These are the five steps we believe are imperative, as they can make the process a lot less stressful and much more peaceful. I hope this was very beneficial information for your new home-buying journey. When you're ready, let's get started. Whether you’re buying a new home or looking for refinancing, have your questions handy. We'll do our best to make the process as easy and straightforward as possible!