Follow a Proven Path to the Home of Your Dreams
Home ownership represents a personal goal and lifestyle benchmark shared by many people. Not only do families count on the safety and security of owning property, but a well-executed home purchase also makes financial sense. Under ideal circumstances, homes appreciate over time, and mortgage payments ultimately build equity, as interest obligations are paid-down. But as appealing as it is to own property, it isn’t an automatic entitlement. On the contrary, reaching this important financial milestone requires diligence and commitment.
Fortunately for would-be home owners, many prospective buyers have successfully navigated the home purchase process, leaving behind a blueprint for others to follow. If you are starting to think about the advantages of home ownership and what it takes to make it happen, consider these important concerns.
Build and Protect Credit References
Unless you are fortunate enough to have access to vast sums of money, your ability to close a home purchase depends upon outside funding. But without solid credit references, your eligibility for mortgage financing is extremely limited. As a result, an essential first-step toward home ownership is building credit.
A strong credit score is not born overnight, so building credit for a home purchase actually begins long before you are in the market for property. From your very earliest credit interactions, your success managing debt and completing repayment support a favorable rating. On the other side of the coin, failure also stays with you, becoming part of your credit record.
As you engage in credit transaction, borrowing money, utilizing revolving accounts, and entering into timed contracts, credit reporting agencies track your behavior. Effective debt management strengthens your credit rating, building a higher credit score over time. But each misstep sets you back, resulting in credit penalties that affect your score. Missed payments, delinquency, and default quickly undermine your credit health, limiting your options later in life, when seeking mortgage financing. Although home ownership may not be on your radar at a young age, building and protecting credit represent your earliest moves toward your dream home.
Evaluate the Market
As home ownership becomes a realistic possibility, it is critical to gain understanding about the real estate market where you plan to live. General economic conditions and the state of your local housing market both come to bear on the selling prices of homes in your target areas, as well as the cost and availability of mortgage financing. Starting with a broad understanding, you’ll be prepared to enter the real estate market when conditions are favorable. How long do homes stay on the market before selling? What is the total inventory of homes in your region? Are selling prices keeping-up with asking prices? Answers to these and other questions give you the tools needed to evaluate individual properties and measure your home-buying expectations.
Obtain Mortgage Preapproval
Before looking at homes, you should consult with lenders, comparing available financing alternatives. Armed with a solid credit score and balanced personal finances, you may be eligible for conventional financing. The best rates and terms are reserved for those with impeccable references, so this is when your track-record of responsible credit management pays-off. Without a strong credit score, your borrowing options may be limited, resulting in higher fees and finance charges. Still, it is vital to secure a preapproval commitment, showing prospective sellers you mean business. By hashing-out the details ahead of time, you’ll refine your property search only to homes you can afford, ultimately saving time and increasing your chances of closing a deal.
Engage a Realtor
While some home buyers take-on the search themselves, partnering with a trusted realtor gives you an advantage in the market. For starters, agents have experience and access to insider information, which can make the difference in competitive real estate markets. And their motivation to close a sale keeps your home-search moving forward. Contracts are commonly written for a predesignated term of 3-6 months of representation, giving you an out should an individual realtor fail to present a winning property.
A successful home purchase is the culmination of a proven, disciplined approach, accounting for all the variables and influences impacting the sale. For the best results closing on your dream home, follow in the footsteps of effective home-buyers who’ve come before you, taking this well-established path to home ownership.