Preparing to buy a home? Congratulations! The current market is competitive, and the key to getting ahead and securing a house is preparation — and demystifying the home buying process.

Whether you’re ready to buy right now or you’re still in the early stages of considering a purchase, these guidelines will help you put your best foot forward and feel confident in the process.

In the early stages of homebuying.

If you’re not in an immediate rush to buy a home, that gives you extra time to research, plan, and get everything in order.

  • The first thing you should do is check your credit history to determine if you’re eligible for a mortgage and how your credit score will influence your possible mortgage rate. There’s a lot to know about how credit scores work for you — you can start here by reading about some popular credit score myths that we debunked. Don’t worry if you’re not in the top tier of credit scores; you don’t need to have a perfect 850 to receive a mortgage loan. However, the more time you give yourself to check your score before you buy a house, the more time you’ll have to improve aspects of that score if you need to. Tip: Ask us about Credit Insights (in our free mobile banking app) so you can check your score, download your report, and even simulate “what-if” scenarios.
  • You’ll also want to start saving up for a down payment as soon as you can. The more time you have to save, the better. Most minimums for a mortgage loan are from 3% to 5%, but the more you’re able to contribute to the down payment, the more likely you are to have a lower monthly payment or a shorter loan term dependent on your credit history.
  • Lastly, you’ll want to determine your debt-to-income ratio (DTI), which is the percentage of your monthly income that you use to repay debts (including a future mortgage payment). According to Investopedia, lenders prefer to see a DTI smaller than 36%, with no more than 28% of that debt going towards servicing your mortgage. You can find many free DTI calculators online.

If you’re ready to buy ASAP.

Perhaps you’ve found your dream home and you want to get a jump on it. The home buying process can move fast, but you still want to make sure you take enough time to prepare, find the right loan rate, and feel confident that you’re making the best decision for you and your financial situation.

  • First and foremost, we recommend finding a good real estate agent. The seller’s agent is hired to advise them, not you, so reach out to people in your area who you can hire to serve your best interest. In fact, you probably have family, friends, or other people in your network who can make great recommendations.
  • Even though the process can move quickly, spend time researching loan options. Agreeing to the first loan offer may cause you to miss out on lower rates or a program that better suits your needs. Your mortgage lender may discuss different options with you, but you should do your own additional research. You can also speak with your real estate agent about this.
  • Apply for a mortgage pre-approval. This involves submitting a mortgage application to your lender and providing supporting documents, such as tax returns, W2s, a credit check, and other financial statements. In fact, some sellers (and real estate agents) will only work with pre-approved homebuyers. A pre-approval is not a guarantee from the lender, but it implies that they will likely approve you for the loan.

Choose the journey that works best for you.

The home buying process is going to look different for everyone dependent on the market in your area, the type of home you’re looking for, your credit history, and other qualifying factors. However, once you’ve decided how much you can budget for a home and you’re ready to start the process, as much preparation as possible — and demystifying the home buying process — will be your golden ticket. At Republic Bank of Chicago, we can help advise you on best practices, where to look for good financing options, and more. Reach out to us by phone at 800-526-9127 or check out our other recent posts for more financial guidance!

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