If you are at a juncture in life and career that has you beginning to think in earnest about eventually buying a home, it’s natural to begin checking out the listings from time to time or to drop in on an open house when one catches your eye. The first thought is usually to begin familiarizing yourself in general with what’s out there. A natural next step is to do some budgetary arithmetic to tell you how far your monthly earnings and account savings will stretch in today’s market.
If your preliminary market reconnaissance and back-of-the-envelope budget numbers indicate that you may be closer to action than you assumed, it’s time to take a pair of action steps without delay:
- Order a full credit report from the three credit bureaus.
- Get pre-approved.
There’s a third action, too—but doing those two is definitely a way to become prepared should you decide it’s time to take action. The current market is frustrating many would-be home buyers. This can happen if you see a home that you really could afford and that really fits your expectations, but then you “lose the house” to other buyers who were better prepared to move decisively.
The full 3-bureau credit report is mandated by the government. It will detail your history of obtaining, using, and repaying credit charges. You are entitled to a full report from each of the three credit agencies once a year for no charge—a rare bargain in this economy. In case there are any mistaken black marks in your history, you can take action to have them removed. That’s free, too—but corrections take time. Buying homes means submitting an offer to the owner, at which point there won’t be time to cure a credit ding. Solving this problem before it becomes a roadblock isn’t difficult—but it does call for advance action.
Getting pre-approved consists of obtaining a letter from a bank or other lender which you can present to any seller. It’s an official assurance that you have shown your financial wherewithal and demonstrated you will be able to finance as much as [fill in the blank] dollars. That doesn’t just give the seller your financial picture—it also demonstrates that you are serious and well-organized. If you find yourself in one of today’s increasingly common them-or-us bidding situations, it’s a no-nonsense way to emerge the winner.
With the National Association of Realtors® having just found that the typical house for sale now receives an average of 3.8 offers, the likelihood that you will encounter competition is a near certainty. Hence the idea that, even before you are quite ready to dive into active house hunting, you’ll be wise to have already taken those two preliminary actions.