One way to smooth the path, however, is to carefully assess your financial situation before you start looking at homes. A little preparation can mean a more assured, efficient process—and a better chance of snagging your dream home.
If you’re thinking of entering the market, here are some suggestions from Daily Real Estate News:
Determine what you can afford: Experts recommend homebuyers cap their housing costs at 28% of their income, in order to live comfortably and cover all expenses. When considering those costs, don’t forget to include estimated taxes and home insurance.
Calculate closing costs: Ask your real estate agent to estimate what you will be responsible for in terms of loan origination fees, title and settlement fees, taxes and prepaid items such as homeowner’s insurance or homeowner’s association fees. These can be significant.
Know your credit score: The better your score, the easier it will be to obtain a low-rate home loan. Request a free annual credit report to know where you stand and to check for errors that might impact your creditworthiness. If errors are spotted, report them immediately to the appropriate credit bureau.
Gather necessary documents: When applying for a loan, you’ll need to show proof of income and other papers. Round up pay stubs, bank account statements, W-2s and tax returns that cover the past two years. Also, gather statements from any current loans and credit lines and the names and addresses of any landlords from the past two years.
Get pre-approved for a loan: This is especially important in Denver’s competitive market. Loan pre-approval assures sellers that you can afford to purchase their home, and your contract will be more seriously considered as a result. Planning ahead will also allow you time to find a loan at the best possible rate.
Buying a home for the first time doesn’t have to be daunting, but it does take some advance legwork.
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