Preparing to Buy a Home

Purchasing a home can be both complicated and overwhelming. Preparation is essential to making the purchase as smooth as possible.

First, check your credit report and score. The higher your credit score, the lower interest rate you will receive on your mortgage loan. With a higher credit rating, you will also get approved for a larger loan.

Next, look at your budget or at least how much you can afford to spend on a home. Get an estimate on how much your monthly mortgage payment will be. Research the many different mortgage loan options available to find what best suits your needs. Also, decide if you will have a down payment. Think about how much you can afford and how that down payment will effect the amount of loan you will need. You should also get preapproved (not prequalified) for a loan amount, so you know how much you can spend.

Lastly, there are closing costs that you need to be familiar with before you decide to purchase. Make sure to budget these costs into your total purchase amount. You don't want to end up with additional unexpected costs that you cannot afford. Below is a brief list of closing cost items:

• Loan origination and application fees
• Points
• Attorney fees
• Appraisal and inspection fees
• Loan interest
• Title search and insurance
• Inspection fee
• Mortgage broker commission or fee
• Tax service fee
• Processing, underwriting and wire transfer fees
• Homeowners insurance
• Private mortgage insurance premiums
• Hazard insurance premiums
• Property taxes
• Escrow fee
• Document preparation and notary fees

You can ask the lender to give you a Good Faith Estimate that will outline the costs and give you a rough estimate of how much you will be paying. You should also consider the cost of maintaining and improving your new home. Especially if there are improvements that must be made or furnishing you need to purchase before you move in.