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Prepare to Buy a House Before Applying for a Loan: Here’s How and Why

Prepare to Buy a House Before Applying for a LoanScrolling through social media your eye spots the perfect house, it’s in a great a location and fits your ideal space requirements. You may want to jump ahead to take a closer look and schedule a viewing with your realtor, but it’s recommended to go through the mortgage pre-approval process before you fall in love with a home that won’t fit your budget. This is great advice, but did you know there are also actions to take before you contact your bank?

By doing a few things before submitting your bank application you can avoid surprises such as high-interest rates or a declined application.

Here How and Why to Prepare to Buy a House Before Applying for a Loan

Check Your Credit Score

You’ve likely seen the commercials about how easy it is to check your credit score these days. It’s important to know what your score is because it is one of the main things banks will look at to determine if you are eligible for a home loan. It also affects the interest rate offered.

Credit reports aren’t always accurate.  A Federal Trade Commission report in 1993 found that 2.2% of credit reports have errors. The chances are low, but a mistake could be costly if left unresolved because you could have higher credit score attached to your name. By knowing what your credit score is you can deal with surprises.

Paying down your debt, starting with credit card debt, is the best way to raise your credit score and help ensure the lowest interest rate available.

Develop a Reasonable Budget

Home improvements or emergency repairs, car upkeep, and medical bills are things we all deal with eventually. Having a good idea of monthly expenses as well as long-term goals, including your new mortgage payment, will help save you from financial stress later.

A reasonable budget will also give you a good idea whether you should apply for a 15 or 30-year mortgage and how long you will need to save for your down payment.

Build Up Your Down Payment

The larger your down payment, the more buying power you will have going into negotiations. By having 20% of the sale price available to put down at closing, you will avoid paying private mortgage insurance (PMI) which adds 1-2% on average to the cost of the loan.

There are other benefits to having a large down payment built up. Closing costs, home inspections, and realtor fees are upfront costs that the home buyer contributes to or pays in total. Once you’ve saved your down payment, your additional savings will help to pay upfront costs or give you the flexibility to make changes to your new home.  

Do Your Research

When buying a house people often consider their current lifestyle as well as where they see themselves in the future. When searching for a specific area to settle into there are multiple factors to consider besides the cost of the home you like.

Is the area growing? What are the average taxes? How are the local schools? Are there current industrial building projects planned nearby? These are questions you might be able to answer with an online search, but an experienced realtor will know the answers to all the questions on your list as well as many you haven’t thought of yet.

At C21 Indian River, we prioritize our customer’s needs through the entire buying and selling process. Contact us and put our agent’s extensive knowledge of Brevard County, FL to use. We are committed to finding you your perfect home.