Buying a home is one of the most thrilling and frustrating experiences you're likely to encounter as an American, especially when you're covered with an affordable home insurance policy. We've gathered 10 tips for home buyers to help make the home buying process go just a little more smoothly for you.
1. Prepare Your Credit in Advance – Far in Advance
According to Bankrate, "The credit score of the buyer may be the most important factor when it comes to qualifying for a loan these days." You can make sure it's up to par by checking your free annual credit report months before buying a home. Lenders want to see that you have plenty of credit available to you, so make an effort to pay down your credit lines to a reasonable percentage of your income before applying for a loan.
This does not necessarily mean paying off balances completely, especially if you have a long history of good credit on a card. Your credit score could suffer if you pay off and close the accounts you have used most.
2. Wait Until You've Found a Place To Settle Down
If you plan to keep moving from city to city, it's probably not the right time to buy. To make a home purchase work out financially, you will need to stay in the same location at least a few years. CNN Money offers the following tip for home buyers: "With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner – even in a rising market." Once you are ready to stay in one place long enough to make the closing costs pay off, it might be the right moment to buy a home.
3. Look for Errors on Your Credit Report
The Washington Post reports that more than 20 percent of consumers find mistakes when they check the details of their credit reports. Because your credit score has such a profound influence over financing approval, you need every line item to show you in the best light possible. Don't let a mistake hold you back.
4. Check Out the Local Schools, Even If You Don't Have Kids
The performance of the local school district matters, according to CNN Money. Future buyers with children will look at school performance scores when deciding where to buy a home. If it matters to future buyers, it matters to you. Having a home in a good school district increases your chances of getting a good price for the home when you decide to sell some day.
5. If You're Self-Employed or an Independent Contractor, Keep Perfect Records
Bankrate advises home buyers to prepare to show at least two years of income and expenditures documentation if they can't provide a W-2. Gone are the days of the no-doc loan, thanks to the abuses of a couple of years ago. A mortgage broker may even recommend that you work one or two months at a job that will give you a W-2 if you cannot show years of solid earnings as an independent contractor.
6. Save At Least 20 Percent for a Down Payment To Save Big in the Long Run
The less you tack onto the mortgage, the less interest you have to pay, and over the course of a 30-year loan, the savings on $20,000 can be huge, depending on your rates. It's possible to find USDA loans and other programs that offer home buyers a low down payment option, but that doesn't mean it's the best financial move. CBS Moneywatch recommends that you "keep your down payment fund in cash or cash equivalent accounts, so that market movements don't thwart your plans."
7. Bring in an Expert (Likely a Real Estate Agent)
The best scenario would be to find a reputable buyer's broker in your area because then you know you have someone in your corner that has your financial interests in mind, rather than the seller's. But even if you can find only a real estate agent, the process will probably go much more smoothly because you are getting professional expertise.
Just remember, according to Jill Schlesinger at CBS Moneywatch, "Most agents represent the seller, not the buyer." Schlesinger also says that those who are buying a home can benefit greatly from the help of a real estate attorney to make sure all the documents are aboveboard.
8. Choose Your Points and Rate Wisely
CNN Money explains, "When picking a mortgage, you usually have the option of paying additional points – a portion of the interest that you pay at closing – in exchange for a lower interest rate." If you only plan to stay in the home a few years, it's probably best to forego paying the points and keep your cash. But if you plan to keep the home for a long time, you will probably benefit more from paying the points and taking the lower interest rate.
9. Make a Decent and Thorough First Offer
Low-ball negotiation tactics are probably not a good idea when making an offer on a home. If you bid too low, the owners could be offended and never consider you at all. CBS Moneywatch advises that you look at selling prices in the immediate neighborhood for fair price indicators.
Also, "The offer should include the price you're willing to pay for the house, your financing terms and contingencies such as specifying what will happen if any problems come up during the inspection." Your agent should be able to offer tips at this stage.
10. Don't Skimp on the Inspection
CNN Money advises home buyers, "Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay." To get a good idea of what shape the home is in and how many repairs you can expect to deal with, hire your own inspector.
The best experts are often engineers and construction professionals who understand local home construction and what local weather conditions might do to the home as time passes. It's better to know before you buy than to saddle yourself with a money pit for decades.
For more expert home-buying tips, seek out a home buyer education class near you, especially if you're looking to buy your first home. According to Bankrate, many state and local governments offer home buyer classes. You can also find approved lender courses locally to educate yourself on home financing. Once you've armed yourself with the knowledge and tools you need, you're ready to hit the market and buy a home.
Once homeowners insurance comes into play, be sure to contact your Trusted Choice independent insurance agent. They can provide you with multiple home insurance quotes to get you the best price.