How to prepare to buy a house in one year in Arizona
Preparing and getting ready to buy your first house can be daunting. It is a long process, commitment and mental ready to be a homeowner. Before you begin shopping for properties or comparing mortgage options, financially prepare is the starting process of becoming a homeowner. Take every step you can to make sure you are financially secure enough to become a homeowner. If you are planning to buy a home in one year or near future, here are some necessary steps you should take well before you start looking.
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Check your credit
Know your credit score. Your credit score determines whether you will be eligible for a mortgage, and it influences your mortgage rate. Double-check the report for mistakes or inaccuracies, if there are some, check with the credit bureaus and dispute any errors. If you find that your score is lower than it should be to purchase a house, take some time to improve it so that by the time you are looking to buy a house, it will be at the appropriate level. You can get a copy of your credit report at https://www.annualcreditreport.com/.
Read: What credit score is needed to buy a house in Arizona?
Pay bills on time
One of the most important aspects in your home buying process is your credit history. Late payments are damaging to your ability to be able to take out a mortgage. Make sure to get on track with your credit cards, utilities, and student loan payments. Set up a schedule and budget in order to pay bills as soon as they are due.
Keep a low balance
The amount of money you owe accounts for 30% of your FICO score. The most important factor in this is how much you owe on revolving loans like credit cards – owing $50,000 in credit card debt is considered a higher risk factor than that same amount in student loan debt. Lender will look at your total debt and income ratio when they are trying to decide whether to lend you money.
Read: What is debt to income ratio (DTI) when applying for mortgage?
Save for down payment and closing cost
If you have money saved up, you can put down a large down payment. Down payment is typically between 3.5% and 20% of the purchase price. The larger the down payment, the more you can save in additional insurances, and it will give you more buying power. You also need cash for other expenses when buying a house, such as closing cost, inspection cost and others.
Read: How important is your down payment when buying a home in Phoenix AZ?
Build a housing emergency fund
Most future home buyers focus on saving for the down payment. But setting aside a cash fund to pay for unexpected home repairs and other emergencies is also important. Once you become a homeowner, there won’t be a landlord to step in when your ac breaks down.
Get your documentation in order
Begin to collect documents that you will need to verify your finances on the mortgage application: paystubs, W-2’s, bank statements and copies of your last two tax returns.
Read: Things a lender will probably need from you when applying for mortgage
Get Familiar with local real estate market
Perhaps you already know the area in which you want to buy your home. If you don’t, use the time ahead to start researching the area and narrowing down your dream neighborhoods. You can make it a weekend activity, searching the nearby areas for neighborhoods that fit the bill. Also look at factors such as transit options, property taxes, school quality and more.
Summary
Buying your first home is exciting, but there’s a lot to think about before you start looking. Start by getting all your finances in order, saving up for a substantial down payment and budgeting well, you will be able to land the home of your dreams.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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