If you're thinking of buying a house this year, you should consider starting your preparations right now. As with most major projects (and you're unlikely to have many bigger ones in your life), careful preparation can make the difference between good and great outcomes. Occasionally, it can make the difference between outstanding success and abject failure.
Mortgage Preapproval or Prequalification
Probably the most important step you can take early on is securing a mortgage preapproval. It's also called mortgage credit approval because once the borrower is approved, he or she should be able to close on any property that meets the lenders' guidelines. The pre-approval process requires a complete mortgage application and is based on credit checks and the verification of documentation that proves your identity, employment, income and so on.
Alternatively, you could start off with a mortgage prequalification, which provides an indication of the amount you're likely to be able to borrow based only on unverified information you've supplied. You can even pre-qualify yourself by using a calculator like LendingTree's Home Affordability Calculator. Prequalification allows you to focus your search on homes you know you can afford.
Preapproval, however, offers a few more advantages: it encourages sellers and real estate agents to take you seriously, it gives you time to deal with any unexpected hiccups in the mortgage process, it removes a great deal of stress from the transaction and it can save you money.
Out of Season
Home sales are heavily seasonal. People like buying and selling in the summer months for good reasons: yards look their best, the sun makes everything feel good, it's not much fun moving in snow or rainy weather, and kids can settle into their new schools at the beginning of the academic year. It's also the time when there's the widest choice in the homes market. But there can be real advantages to going against the grain and buying in winter, early spring or fall:
- A home sold during the seasonal peak selling time can on average command a price six percent higher than it would during the least busy months. That's a lot of money.
- Some of the best bargains arise when individual owners become desperate to sell -- and that happens year-round. If you're restricting your home search to only a few short months during late spring and summer, you could miss out on some serious opportunities.
- You're much less likely to have to fight it out with a mob of competing buyers in the off-season.
- You could enjoy a faster and smoother purchase. Lenders, brokers, appraisers, attorneys ... all the professionals you rely on for your transaction are less busy.
- Mortgage rates could rise soon. Yes, it's true that so-called experts have been wrongly predicting higher rates for years. But oil prices are rising, unemployment is falling, and what goes down eventually does come up. Many believe the hikes are going to start this summer. Wouldn't you like your fixed-rate mortgage locked up before then?
If you don't have kids -- or are prepared to take some risks over their school enrollment -- the end of summer can be a great time to buy. It's when homeowners realize they've almost certainly missed out on their chance to move this year, and desperation can create a highly motivated seller.
When to Buy a House
The time to buy a house is when you've found your dream home and have the mortgage you need (and can afford) to buy it. That may happen during the summer, but you might miss your window if you restrict your search only to those months.