Steps to take when you start to think you’d like to buy a house
First, you will need to figure out exactly what features you have to
have. Which neighborhoods do you especially like? How many bedrooms and
bathrooms do you need? Do you want a gourmet kitchen? How large a yard
do you want? Do you want to be in a particular school district?
Then, make a list of the features that are absolutely essential. Be truthful and realistic as you make this list. Then make a list of features you’d like to have if you can find them in the right location and within your price range.
Next, check your credit report and credit score. By federal law, you are entitled to one free copy of your credit report per year, from each of the three major credit reporting agencies, Experian, Equifax, and TransUnion. These agencies have established a website, https://www.annualcreditreport.com/cra/index.jsp, where you can either request copies of your report online or by phone. The reports will be mailed to your street address, usually within seven to 10 business days.
Once you get your reports, check them to make sure that the information on them is correct. If you do find wrong information (and this is not uncommon), you will have to dispute that information to get the report corrected. You will have to contact the specific agency to do this, so check the website for contact information. You can file your dispute online or via mail.
Now you should look at your credit score. A score of 700 or above is
considered good, and will get you better terms with your lender. A score
below 600 generally means you will pay a higher interest rate on your
loan.
If your credit report and credit score are less than optimal, it may take some time to improve them. The methods for repairing your credit are simple—pay your bills on time, don’t carry big balances on your credit card accounts, and always make more than the minimum payments.
You should do as much as you can to pay down your debts. Lenders look at the overall amount of debt you are carrying when you apply for a loan to buy real estate. Ideally, your total debt should always be less than half your approved credit limit.
Finally, stash some cash. You will need some cash to make a down payment on the house you choose. The days of the zero-down mortgage are behind us, and the interest-only mortgage is becoming an increasingly rare animal, available only to those with stellar credit ratings and significant cash reserves. Some federally backed mortgage programs will get you into a house for as little as 3 percent down, but it’s best to have a little money in the bank, just in case you can’t qualify for those loans.