For many real estate markets across the United States, spring is one of the best seasons to buy a home. The weather is warming, snow is dissipating or has disappeared altogether, and the positive shift in weather is prompting people to come out of their hibernation to start the search for their next home. If you're on the hunt for a new house this spring, take a look at these six steps to buying the perfect home this season.
1. Get your credit in order
If you plan on buying a home with financing, a large factor in qualifying for a mortgage will be your credit score. While other factors like debt-to-income ratio and gross household income contribute to your approval, your credit score will directly affect the rate you'll receive and the down payment the lender will require. The Federal Housing Administration (FHA) states that the minimum credit score for a low-down-payment, FHA loan in 2020 is 580, although most banks and lending institutions require a 620 or higher.
If your credit score is low, work on improving your score by paying your debts and obligations on time and reducing your overall debt. The higher your credit score, the better your financing terms will be.
2. Add to your down payment
While you wait for the warm weather to arrive, start stockpiling additional funds that can be used for a down payment on a loan. Having a larger down payment reduces your monthly payment amount and in many cases opens the door to lower interest rates. Putting at least 20% of the purchase price as a down payment eliminates the need for private mortgage insurance (PMI), too.
3. Find a Realtor
While there are no requirements to purchase a home with a real estate agent, working with an experienced Realtor can make the homebuying process far easier and less stressful. A quality Realtor will help with the shopping process, narrowing down the best properties that meet your budget and homebuying requirements as well as negotiating price and terms of the offer or contract and assisting you through closing.
If you don't already have a good Realtor to work with, ask for referrals from friends or colleagues to see if they have one they can recommend. It's also helpful to find a Realtor who has experience and expertise in your area or price range.
4. Line up financing
Once your credit score, down payment, and Realtor are in place, start searching for the right mortgage loan. You can work with a mortgage broker or mortgage banker to get pre-qualified, which will also help you determine what you can actually afford based on your income, expenses, credit score, and debt-to-income ratio. Having a pre-qualification letter can also increase the strength of an offer -- especially in a competitive market -- because it shows you are a qualified shopper who is ready to buy.
5. Determine your budget and must-haves
The last step before you begin the house hunt is to solidify your budget, what you can afford, and your must-haves for your next home. It's important to be realistic about your budget and expectations. While you may want a waterfront property or a four-bedroom home in the best school district of your city, your budget may not allow it.
Lining up your financing beforehand will help you confirm what you can afford, and your Realtor can help you make sure your expectations and must-haves will align with that. Do take into consideration:
- The neighborhood.
- The school zone.
- The property type (such as ranch, bungalow, condo, townhouse, etc.).
- The number of bedrooms and bathrooms.
- The overall square footage.
6. Start searching
From here, you can begin the search for your perfect home. Although spring is a busy season in some markets, it may not be the best time to buy in your market because of high competition or low housing inventory. Speaking with a local Realtor who knows your market can help you ensure you're buying the right property at the right price and time.