Get a pre-approval before you search for a home. A pre-approval cost you nothing and tells sellers that you’re serious about the deal, which may help you get a better price. In addition to checking your credit score and employment history, lenders will verify that your income is sufficient to pay for monthly payments.
Know what to expect when it comes time to make an offer on a home.
If you’re a cash buyer, the process is fairly simple because you won’t be asked to provide financing documents. But for buyers who need to finance their purchase, lenders will require supporting documents such as pay stubs and W-2 Forms. Lenders also want to see documentation that demonstrates your ability to make ongoing mortgage payments. A good starting point is the front page of your Federal Income Tax Return from two years ago, which includes figures for Adjusted Gross Income and taxable income.
Choose a lender in your area that offers competitive rates. If you’re looking for a place to buy a home soon, it’s worthwhile to have several lenders provide you with pre-qualification letters so you have a better idea of what rate to expect during the mortgage application process.
Think about whether you want to buy a home or refinance an existing loan. Refinancing can be an attractive option if rates are low and your credit score is good, especially for those looking to lower their monthly payment or shorten the length of their loan.
If you’re thinking about buying a home, remember that there are costs associated with the transaction that might eat into your savings. The best way to make sure you have enough cash in the bank is to make an honest calculation of how much money you need, subtract any fees or closing costs associated with buying a home and then ask for help from someone who understands mortgages and real estate.
Understand the tax advantages of home ownership. Buying a home provides you with possible tax deductions, such as for mortgage interest, property taxes and closing costs. And if you’re eligible to deduct points paid on your loan, that’s another bonus.