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Get preapproved for a mortgage
If you need a loan to buy the home, a real estate agent will want you to talk with a mortgage professional.
As Jay Dacey, a mortgage broker for Metropolitan Financial Mortgage Co. in Minneapolis, explains, "A good Realtor will ask you what your criteria are and set up a search through the MLS for you, but a good Realtor is also going to say, 'The next step is for you to contact a mortgage professional and make sure you're preapproved.'"
A mortgage preapproval makes your purchase offer more credible. Even more important, when you get a preapproval the lender will tell you how much you can afford to borrow. So a mortgage preapproval is a budgeting tool that lets you know how much you can afford to spend on a home. It prevents you from overspending and narrows down the price range of houses you look at.
SEARCH RATES: Get preapproved for a mortgage today.
Time your purchase well
Timing is a crucial element in homebuyer readiness, says Amy Butterworth, an associate broker for Gibson Sotheby's International Realty in Boston.
A time frame that's too long doesn't make sense, and neither does a timetable that's too short. For example, if your lease doesn't expire for many months or you need to move within 30 days, buying a home might not be practical for you right now, Butterworth says.
The ideal situation is to be ready to buy and be able to wait, especially if sellers are fielding multiple offers.
You can't be too hesitant, Butterworth says, and you "can't only be ready and raring to go because there will be disappointments -- that's just how the market is right now. You have to go into it with realistic expectations."
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Save for a variety of costs
If you're a first-time homebuyer, you have to save for a down payment. If you own a house and you're selling it, any equity you have can be used as a down payment. Regardless, you'll need to have some savings, says Ken Pozek, a Realtor for Keller Williams Realty in Northville, Michigan.
That's because you'll need an emergency fund, moving expenses and home maintenance costs when you budget for a home purchase.
"A lot of people forget that there is a lot of maintenance with owning a home, especially if you've been used to renting. From a financial perspective, (it's important to) make sure that even if you're emotionally ready or excited to buy, that you have nest eggs set up as well," Pozek says.
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Shop wisely for a mortgage
When you compare mortgage deals, you'll focus on interest rates. But pay attention to fees, too.
You will get a three-page document called the Loan Estimate for every mortgage you apply for. If you apply for more than one mortgage (recommended), you can compare the Loan Estimates side by side. They contain the information you need.
The first page of the loan estimate describes the loan's basic terms: The amount, interest rate, estimated monthly payment, closing costs and how much cash you'll need at closing. The second page itemizes the loan costs.
Page 3 has a "Comparisons" section that has useful information. It tells how much each loan will cost over the first five years: closing costs plus 60 monthly principal and interest payments. It also tells how much principal will be paid off in the first five years. When you compare these numbers, it might be simple to identify the best loan offer.
SEARCH RATES: Found a home, even in a seller's market? Comparison-shop mortgage rates today.