Benefits with Commonwealth of Virginia Members

Home Buying Preparation

There are several actions you should take when considering buying a home. First, you should consider the size of your family and what home features will be needed to comfortably accommodate them. The needs of a married couple with children will be different from the needs of single person with no children. In addition to these types of considerations, there are five critical factors that should be considered when preparing to buy a home to ensure a successful outcome.

1. Pull your credit report.

Begin by pulling your free credit report from Link opens in a new windowhttps://www.annualcreditreport.com. This will provide you with info from all three credit-reporting agencies in the United States so that you know your credit standing at Equifax (Link opens in a new windowhttps://www.equifax.com), Experian (Link opens in a new windowhttps://www.experian.com), and TransUnion (Link opens in a new windowhttps://www.transunion.com). They are regulated by the Federal Trade Commission. After reviewing your credit report, if you detect errors, you can dispute them. If the information really is inaccurate, it will be removed by the reporting agency or agencies after verification.

2. Get preapproved.

By determining your housing needs and wants according to affordability before you begin looking for new homes, you will prevent yourself from being disappointed later. Getting preapproved by a lender helps you to establish a purchase range and gives you an idea of what you can expect from the lender. Furthermore, preapproval allows you to make a home purchase within 30 days should you find yourself in a tight position for any reason.¹

3. Plan for up-front costs and the down payment.

Up-front costs will include fees for the appraisal, survey, loan application, and home inspection. In addition, there will most likely be a need for a down payment and closing costs. The minimum amount needed for a down payment is determined by the lender. Closing costs can be fees that are paid in advance of closing or fees that are payable at the time of closing. They may consist of recording fees, payments due to professionals such as attorneys, or lender costs. Escrows, which are the initial payment of two to three months of taxes and insurance, will also be included in your closing costs; this money will be held in reserve to pay these fees at a later time.² Closing costs generally range from two to seven percent of the purchase price.

4. Have some post-purchase funds in reserve.

Through proper planning, you can save for new furniture and appliances if you choose to, along with any deposits you must pay, such as utilities. With homeownership, costs will include your mortgage payment, increased utilities payments, and maintenance. Don't forget to save for those unexpected repairs if you are not purchasing a newly built home.

5. Find a realtor.

It is important that you find a licensed realtor whom you feel comfortable working with and who you feel understands what you are looking for in your home purchase. You can search for realtors nationwide at Link opens in a new windowhttps://www.realtor.com/realestateagents. Should you need it, there is a consumer advocacy group that advocates on behalf of home buyers.

When preparing to purchase a home, one must consider the added cost of time and additional funds required in order to maintain your real estate investment. Furthermore, there are no guarantees when it comes to the increase in value of your home. Unstable market conditions, wear and tear on the property, and other factors could contribute to a decrease in value. Homeownership has many advantages, but it does come with its share of responsibility and a few disadvantages. That responsibility begins with taking the right actions for a successful home purchase outcome.

References

1. Benchmark. (2014, April 7). Why getting pre-approved for a mortgage is important. Retrieved May 23, 2024, from https://kensawan.benchmark.us
2. Ewing, T. (2022, July 17). Real estate tax and escrow/reserves explained... Retrieved May 23, 2024, from the Federal Title and Escrow Company: https://www.federaltitle.com