Gearing Up for Spring Home Buying Season

The spring home buying season is just around the corner–are you prepared?

Hopeful home buyers this spring will have some advantages as well as some challenges, depending on their location. Inventory seems to be getting better in many of the nation’s major housing markets, but competition is still pretty high. Demand continues to outpace supply, driving prices higher in many markets. In order for buyers to position themselves favorably, taking the steps to be well prepared is crucial.

Getting Pre-Approved

A lot of home buyers make a mistake by starting their home search before they get pre-approved for a mortgage. By getting pre-approved, home buyers essentially have proof to show home sellers that they are serious about making an offer and they’ve already begun the financing process. This can give buyers a leg up against the competition when being compared to buyers who are not pre-approved.

Pre-Approved vs Pre-Qualified

Although these two terms sound very similar, they do not mean the same thing. Pre-qualification is often the first step taken by borrowers when they contact a home loan professional. The process typically involves a simple review of the borrower’s financial picture, but the information is not officially verified.

By contrast, pre-approval is a more involved process in which the lender verifies the details of a borrower’s finances. Credit score, employment status, income, debts and other factors may be reviewed and verified in order to determine how much money the borrower can borrow.

Once the pre-approval process is complete, the lender will supply the borrower with a letter of pre-approval. This letter will outline the amount of money they are eligible to borrow and what type of loan structure they qualify for. This can be very helpful for borrowers, as it provides them with a maximum home buying budget as well as documentation that may give sellers more confidence to do business with them.

Other Ways to Prepare

In addition to getting pre-approved for financing, there are a few other steps home buyers can take to ensure they’re prepared for their buying journey.

Do a credit check-up.

It’s a good idea to double-check your credit standing before you apply for a home loan. Lenders will run a check of your credit score and history and the last thing you want is them to uncover any unpleasant surprises. Since consumers are entitled to a free credit report once a year from each of the three major credit bureaus, you might as well take advantage of it. Below are links to the credit bureaus:

• TransUnion
• Experian
• Equifax 

Don’t open new credit.

Try to avoid signing up for any new credit cards, lines of credit or loans before starting the home buying process. This could affect your debt-to-income ratio and will lower your average account age. Lenders like to see established, long-term credit. New lines of credit make it look like you haven’t had as much credit for as long, which won’t necessarily disqualify you for a loan, but it could make it harder to qualify for the best interest rates. Applying for credit also triggers a “hard inquiry” on your credit report, which can lower your overall FICO score. Even though hard inquiries typically only lower your score a few points, if you have a score that barely meets the minimum, losing a few points can cause you to be disqualified.

Find a great real estate agent.

While some buyers prefer to do their home buying solo, it can’t be overstated that working with a qualified real estate agent can be a hugely helpful resource. Buyers agents work on behalf of the home buyer, ensuring they represent the buyers’ best interests and provide their knowledge and expertise to help buyers find what they want at a price they can afford. If you’re buying a home for the first time, it’s probably best to work with an experienced buyer’s agent who can guide you through the process and answer your questions. Be sure to look for a real estate agent who is responsive, professional, and good at communicating.

If you need help finding a real estate agent in your area, check out the following resources:

• Find a Real Estate Agent in Your Area – realtor.com
• How to Find a Good Buyer’s Agent – nerdwallet.com