Owning a home is a big part of the American dream. Like most, you probably dream of having your own space to decorate and make feel like home. But hunting for the right home requires a lot of care and caution. You don't want to accidentally spend too much, over-pay, move into the wrong neighborhood, or buy a home that needs more repairs than you're capable of making. Before you seriously start looking for homes to buy, it's best to complete these three tasks as a potential home buyer.
Check your credit score.
The higher your credit score, the better mortgage rate you'll be offered by the bank. And even a difference of 0.1 or 0.2% in your interest rate can make a big difference in the amount of money you pay over the life of a 15 or 30-year mortgage.
You can check your credit score for free once per year. The most commonly used credit score is called the FICO score. If yours is between 800 and 850, your credit is considered exceptional, and you can be guaranteed a very good mortgage rate from the bank. A score between 740 and 799 is very good; you're ready to start shopping if your score falls in this range. If your FICO score is below 740, on the other hand, you'll want to spend a few months improving it before you officially apply for a mortgage and start house shopping.
Calculate how much you can actually afford to pay for a mortgage each month.
Often, the bank will agree to lend you more than you should actually borrow. So, it's up to you to calculate how much you really should pay for a home. A good way to do this is to look at your monthly budget. Write down how much you earn each month, and then list all of your bills (other than a house payment). Subtract the total of the bills from your earnings. This gives you a "leftover income."
You should then decide what portion of this "leftover income" you can afford to dedicate to your mortgage. Make sure you leave enough for discretionary spending, entertainment, savings, and so forth. For instance, if your "leftover income" is $2,000, you may decide that you can afford to pay $1,000 towards a mortgage, $400 towards entertainment, $400 towards savings, and $200 for emergencies.
Once you know how much you can afford to pay towards a mortgage each month, give your realtor this figure. They can focus on showing you homes that fit into that price range.
Decide where you want to live.
It's incredibly helpful to narrow down the neighborhoods you'd like to live in before you start house hunting. This will stop you from going to look at lots of houses, only to arrive there and find that you don't even like the place where they're located.
Look into school districts, distance from the thruway, overall ambiance, and home prices to settle on a few neighborhoods you like. Then, take walks and drives through all of them to narrow them down further. Choose one neighborhood that is your top pick; you'll know to look at any home that meets your criteria in this area. Then, assign two or three substitute areas where you'd be willing to live if a place does not open up in the original neighborhood.
Once you know what neighborhood you'd like to live in, how much you can pay each month, and that your credit score is in good shape, you'll be ready to start looking at houses. Find a realtor, if you don't have one already, and have a happy house hunting process!