3 Things to Do BEFORE You Start House-Hunting
If you plan to buy a home in Tampa Bay, there are three things you should do before you even start looking. This guide explains.
3 Things to Do BEFORE You Start House-Hunting
Check out the three basic tasks you need to perform before you start house hunting:
- Save up money for a down payment
- Check your credit (and improve it)
- Get mortgage preapproval
Here’s a closer look at each.
#1. Save Money for a Down Payment
it’s never too early to start saving your money for a down payment on a home in Tampa Bay. The more you can save, the better. Though there’s no hard and fast rule that says you must have a 20 percent down payment, the closer you get to that figure, the better off you’ll be over the long term.
There are a few reasons for this. First, the higher your down payment is, the lower your monthly mortgage payments will be. That saves you money each month, and over the long term, it can result in thousands more in your pocket.
Second, with most mortgage loans, you have to pay for private mortgage insurance if you don’t have a 20 percent down payment. Private mortgage insurance protects your lender, not you, and it costs you money each month. There are a few exceptions, such as the VA loan (which prohibits lenders from making you buy private mortgage insurance), but generally speaking, your lender will require you to pay for this insurance until you’ve built 20 percent equity in the home.
Related: What to do if your appraisal comes back low
#2. Check Your Credit (and Improve It)
Sign up for a free credit monitoring service to keep tabs on your credit score. You need to know what your score is because your interest rates and the terms of your loan depend on it. Higher credit scores typically translate into lower interest rates because they show lenders that you responsibly repay your debts.
It takes time to improve a credit score, and you may want to talk to a financial advisor if you need to take steps to boost your own. However, most experts agree that paying down high interest debt and lowering your credit card usage are both great ways to improve your credit score. Avoid opening any new accounts or making any large purchases on credit before you begin house hunting.
If you have credit card and other debt that’s all over the place, one solution may be to take out a personal loan that has a lower interest rate than your lowest-interest line of credit has. Consolidating your debt this way enables you to make one monthly payment, which reduces the chance of you being late, and it can save you money overtime period however, you should talk to a financial advisor before you make a decision like this.
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#3. Get Mortgage Preapproval
You shouldn’t start searching for homes until you have mortgage preapproval. That’s because when you make an offer on a home, you want to show the seller that there’s actually someone out there willing to let you borrow the money to buy it. Many sellers won’t even entertain an offer that doesn’t come with a preapproval letter.
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