5 Steps Homebuyers Must Follow Before Shopping

If you’re thinking about buying a home in the Albuquerque metro market, you might want to begin by making sure your “financial house” is in order. Tighter credit guidelines in recent times will be easier if you’re well-prepared financially.

Remember, however, that these guidelines, such as those set forth by the Dodd-Frank Act, are not just in place to make homebuyers’ lives difficult, they’re also there to help protect you against bad lending practices.

Nonetheless, I suggest homebuyers commit to doing five things before hitting the home showing trail.

1. Put your taxes behind you. File them now. You know that lenders will want to see your most recent tax returns which state your income. Even if you owe taxes and are in the process of making a payment and filing an extension with the IRS to refile your return in six months, you’ll need to show your lender other documents to prove income. But your tax return will still be needed later.

2. Have all your financial documents in order. You should be able to prove your income for the last two years. Make sure you have your W-2’s or 1099’s (for self-employed income).

You’ll need to show you have enough assets and mortgage insurance to secure a loan. Your debt-to-income ratio cannot exceed 43%, and you should have two months of mortgage payments and insurance put aside.

3. Check your credit report. You should do this as much as a year before considering buying a home – not just to check your credit score – but to allow enough back-and-forth communication with credit agencies for disputing errors and getting them corrected. Errors can take up to three months to clear up. You can get a free credit report at AnnualCreditReport.com.

4. Get a letter of pre-approval. As you come closer to getting your financial house in order and approach the time to actually shop for homes, you’ll need to talk to a qualified lender about getting a letter of pre-approval. You’ll know what you’re approved for, you’ll make confident offers, and your real estate agent will be able to help you better, knowing your situation.

5. Search the housing market online. Begin with my Albuquerque home search tool. Save properties for future reference, request more info from me, or schedule a showing. Do your homework online so you’re better prepared when you see your choices in person.

Remember, you don’t want to be the impulsive homebuyer who is excited by a home they think they can buy and then start doing the hard work of preparing their finances. By following my five steps above, you’ll be the smart home shopper!

If you have any home shopping tips you’d like to add to this post, please leave them in the comments below. And if you’re thinking about buying or selling your next home in metro Albuquerque, contact me today!