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Buying a home is exciting, but it’s also one of the biggest financial decisions you will make. Whether you’re planning to buy your first home or looking to relocate, now is a great time to start preparing for homebuying season. Follow these strategies to reduce stress and increase your chances of a successful home purchase this season.

Before You Start Your Search

Buying a home isn't something to rush into. Proper preparation will set you up for success, and it's best to start early. Here are the first things you should do before diving into your home search:

• Check up on your finances. Before you dive into the housing market, take a close look at your financial situation. Review your income, expenses, savings, and debts. Get a clear picture of where your money goes each month and how much you save. Mortgage lenders look at your debt-to-income ratio; typically, 43% is the highest DTI ratio a buyer can have to qualify for a mortgage. Ideally, you want to keep your DTI ratio below 35%. If you’re falling above that threshold, think about where you might be able to cut back on expenses, pay down debt, and prioritize saving for your new home.
• Review your credit score and reports. Good credit will help you get a better mortgage rate. You can get free copies of your credit report from all three bureaus annually. You can often check your credit score right on your credit card account page. This is a numerical prediction of how likely you are to pay a loan back on time based on information from your credit reports, like your payment history, credit history length, and credit utilization ratio. A higher score demonstrates that you're a lower risk to mortgage lenders.
• Reduce or eliminate credit card debt. Paying down – or paying off – balances, especially in high-interest credit lines will improve your credit score and DTI, increasing your chance of getting a mortgage at a better rate. In addition, carrying less debt overall can reduce financial stress.
• Save for your down payment and closing costs. Many buyers opt to put at least 10% to 15% of the total price down. The more you put down, the less you’ll need to borrow and pay in interest over time. A larger down payment may earn you a better interest rate on your mortgage, avoid monthly mortgage insurance on conventional or FHA (Federal Housing Administration) loans, and lower closing costs. Closing costs usually range from 2% to 5% of your total loan amount, including appraisal, title insurance, and origination and loan underwriting fees.
• Talk to a lender. Consult a lender early to understand your borrowing limits and monthly payments. Wait to get pre-approval until you’re ready to make an offer; it’s typically valid for 90 days.
• Create a realistic budget. Once you have a clear picture of your finances and likely costs associated with homebuying, create a solid budget to figure out the range of prices you can afford. Remember to factor in potential property taxes, insurance, utilities, and maintenance costs on top of your monthly mortgage payments.
• Understand your mortgage options. There are various types of mortgages — fixed-rate mortgages, adjustable-rate mortgages, FHA loans, VA (U.S. Department of Veterans Affairs) loans, and more. Each comes with its own benefits and requirements. A mortgage expert can guide you through the options and help you find the best fit for your situation.
• Create a list of needs and wants. First, decide where you want to live so you can set your search boundaries. This may depend on where you work, desirable school districts if you have kids, proximity to family and friends, and local amenities. Then, decide what’s negotiable and nonnegotiable when it comes to your new home. Are you looking for a single-family home or townhouse? Do you need it to be move-in ready or are you willing to put in some extra work for a lower purchase price? Are there specific features you can’t live without – like a driveway, a basement, or a backyard?

When You're Serious About Searching

Ready to commit if you find the right house? Here are some helpful tips for getting started.

• Interview real estate agents. Find an agent you can trust and who will advocate on your behalf. Read online reviews or ask friends for recommendations, and then set up appointments to meet with a few agents so you can learn more about their experience and how you may get along. Avoid using a real estate agent who is selling a home you are hoping to buy because they are focused on the seller’s interests, which may give you less negotiating power. Be sure to ask about fees and who pays the agent’s commission before you sign on.

As an American Heritage Credit Union member, you can register for My CU Home Connection™. Buyers receive benefits including a $500 lender credit and non-title fees waived when using an authorized My CU Home Connection Real Estate Agent.

• Start looking. You and your agent should search listings to find houses that might meet your requirements. Research the homes and neighborhoods in your price range. Go to open houses and schedule tours of homes you're interested in with your agent, and take notes or pictures of parts of the houses you really like, as well as potential issues that may require additional research or that you may need to bring up with a home inspector.
• Get pre-approved. As you search, you'll need to know exactly what you can afford, so meet with a lender or lenders to get a pre-approval. During this process, lenders will make a hard inquiry to get detailed information about your credit history, debt, and general finances.

American Heritage Mortgage loan staff can help you purchase your home, supporting you every step of the way! Ready to discuss a mortgage loan? Call an American Heritage Mortgage professional at 800.808.2662. You can also start your mortgage application by clicking here.

When You Think You've Found "the One"

You’ve found a house that’s right for you – so now what? There are some more important steps you have to take before the keys are in your hand.

• Make an offer. Your real estate agent should know what prices comparable houses in the area are bringing in and if the sellers are motivated to act quickly. In a competitive market, a house in good condition might require a higher offer than one that needs some repairs. If the seller turns you down, ask your agent if it’s worth making a counteroffer. If the seller accepts, you will likely be asked to make a “good faith” deposit that can later be applied to your purchase. Then you’re on to the next step!
• Apply for your mortgage. Now it's time to get the loan you'll need to buy your new house. Once you've completed the mortgage application, you'll go into underwriting, during which time the lender decides whether to give you the loan. All elements of your finances, including W-2 forms from the past few years, recent pay stubs, federal tax returns, recent bank statements, and any debt accounts, will be reviewed.

As a credit union, American Heritage can offer rates and services you won’t find at conventional banks. We are a full-service mortgage provider, offering a comprehensive range of home financing and buying solutions.

• Secure homeowners insurance. Many lenders want you to have insurance before they issue a mortgage. Work with an insurance agent to create a policy that will fully cover your new home, even if it is destroyed and needs to be rebuilt.
• Schedule a home inspection. A licensed home inspector should visually inspect all parts of your house and its systems, including heating and cooling, plumbing, electrical, roofing, the foundation, basement, and structural components. For specific concerns, like mold, radon, or pests, you’ll also need to schedule a more specialized home inspection. You should choose the home inspector and pay for the home inspection. If it uncovers problems that weren’t included in the seller’s disclosures, you may be able to negotiate for repairs or a lower total price.
• Get a home appraisal. An appraisal determines the market value of the home you're buying by comparing it to similar, recently sold homes to determine the market value of the property. This will help ensure you're not paying too much for the home you're getting.

The Choice Is Yours

Homeownership is a big step, but with the right preparation, it can be a rewarding one. Start your journey today—visit American Heritage Credit Union to explore your mortgage options and take the first step toward your new home.