The Six Degrees Team shares our essential checklist to complete before you buy a house
Are you considering a new home in the new year? We think that sounds like a great goal! But first, run through our list below of our top 6 things to do before buying a house. There are some things that you can do (and work on) now that make the homebuying process easier when the time comes.
1. Establish Your Budget
Before you start browsing listings, determine how much you can afford to spend on a home. Consider factors like your income, savings, and other financial obligations. A good rule of thumb is to aim for a mortgage payment that doesn’t exceed 25-30% of your monthly income. To determine this figure, calculate your debt to income ratio.
Monthly Debt / Gross Monthly Income = Debt to Income Ratio
2. Check Your Credit Score
A strong credit score is crucial for securing a favorable mortgage rate. Check your credit report for any errors and work on improving your credit score if necessary.
If your score is 620 or above, you should qualify for most loans. If you’re above 720 (pat yourself on the back) you may qualify for a lower interest rate. If you’re below 620, look into how you can increase your score. Credit score is based on the following information:
Your payment history
The amount of money you owe
The length of your credit history
Types of credit you’ve used
Your pursuit of new credit
We recommend you pull your credit score from each of three major credit reporting agencies:
3. Save for a Down Payment
The amount of money you’ll need for a down payment depends on your loan type and how much money you borrow. Down payments typically range from 3% to 20% depending on the type of loan. VA loans can have a zero down payment option.
Typically the higher the down payment the lower the monthly payment and a lower interest rate. Plus, if you put at least 20% down on a conventional loan, you won’t need to pay for private mortgage insurance (PMI).
CLOSING COSTS: Closing costs are fees that usually range 2 to 5% of the home value.
4. Get Pre-Approved for a Mortgage
This process typically involves answering some questions about your income, your assets and the home you want to buy, as well as a credit check.
Obtaining pre-approval from a lender will not only give you a clear idea of your budget but also make you a more attractive buyer to sellers. Pre-approval signals that you are a serious and financially qualified buyer, and we always recommend you meet with a lender before starting the process of buying a house.
5. Make a (Reasonable) Home Wishlist
It’s time to rank your must-haves in a home from most important to least important. Here are the top 10 things that our clients prioritize:
Home condition and need for repairs
Number of bedrooms
Walkability/access to entertainment
Local school district ranking Property value trends
Property/real estate taxes
Proximity to work/transit
6. Hire a Real Estate Agent
Oh, hi there! You’ve done your homework and now it’s time to look at houses! Here’s just a little of what you can expect from Six Degrees:
We help you narrow down your must-haves.
We know the greater Seattle communities…and we’re going to show them to you!
We streamline the entire buying process through our online systems. There’s an app for that! (and you’ll love it.)
We help you understand price valuations in this market so you can put in a competitive, reasonable offer.
We are a full-service – we keep all the balls in the air for you – start to finish.
We value honesty and integrity. In. Every. Situation.
We stay connected long after you close – fun events, educational offerings…we love community!
In conclusion, whether you’re a first-time homebuyer or a seasoned pro, doing these things before buying a house while make the process so much easier later. Learn more here about how we work with buyers. Happy house hunting!