Too many potential buyers find the house and only then worry about financials. That might be why they’re only potential buyers. Instead, first take an X-ray of your financial life.
Put exact numbers on the figures you’ve probably been estimating up to now:
— What do you make every month?
— How much do you spend every month?
— How much do you have in your down payment account?
— What are your assets and liabilities?
— How much are you carrying in debt — credit card and otherwise?
— What big expenses or windfalls (like a raise or bonus) do you expect in the next six months or year?
— What’s your ideal monthly house payment?
While you’re at it, this is the time to assemble information that potential mortgage lenders will need.
Get a ring binder and include two years of tax returns, three months’ pay stubs, and three months’ statements for all of your checking, savings, investment and retirement accounts.
Get preapproved for a mortgage
In most cases, you can’t get the actual mortgage until you have a house to plug into the equation.
But you can get the next best thing: Preapproval, which “carries more weight with the prospective seller” than a prequalification. Preapproval means the bank has pulled your credit, looked at your financial records and is likely to offer you a loan of up to a specific sum.
Shop around and get preapprovals from several banks. If you make those applications within a 45-day period, your credit score will count them as one application.
Decide how much you want to spend on a home. It might be a lower number than the amount the bank is willing to lend.
Line up your helpers
When you find the right home, you want to be able to act quickly. One key move: Vet and line up pros you’ll need to speed that sale — like home inspectors, agents or attorneys — in advance.
You can do the same with services you’ll need, like moving companies, cleaning services, locksmiths, handymen and contractors.
Learn your local market
Buyers should right now be educating themselves on the market. And as you learn more about your target market, narrow that focus to several towns — a small radius.
You know you’re ready when you can walk into a house in your target market, look at what it offers and know exactly how much it should cost.