10 steps to finding your dream home

Finding and buying a home can be an exciting adventure. But if you aren’t careful, you can make mistakes that will quickly turn your dream home into a nightmare.

So before you start shopping, build a roadmap that leads to the home you want. Here are 10 steps to get you there.

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How to find your dream home
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How to find your dream home

1. Get your head on straight

It’s easy to see something you can’t afford — a bigger home, grander kitchen, better neighborhood, more bedrooms, fabulous design — and start rationalizing why you need it and how you can get it. This is normal.

These intense desires, though, can cloud your judgment — maybe just momentarily, but sometimes long enough to cause mistakes with long-lasting consequences. This is why savvy home shoppers nail down financing before shopping for homes. Know exactly what you can comfortably afford so you aren’t tempted to stretch to pay more than you should.

2. Pull your credit reports

The first step in applying for a mortgage is to make sure your credit reports have no errors. These could cost you money in the form of a higher interest rate than you’d otherwise get.

You can get a free credit report each year from each of the major credit-reporting agencies — TransUnion, Experian and Equifax. Apply for a report from all three, making sure each is error-free. Do it as much as a year before applying for a mortgage so you have time to correct any errors you find.

For more tips, read “How to Get Your Free Credit Report in 6 Easy Steps.”

3. Learn your credit score

Your credit score is a big factor in determining the cost when borrowing money. Mortgage lenders use the score — usually a FICO score — in deciding what interest rate they’ll offer you.

Again, do this long before home shopping so there’s time to raise your score if you discover it’s low. There are a number of ways to get your FICO score for free. If you find you need to improve it, try these “Boost Your Credit Score Fast With These 7 Moves.”

4. Consider renting versus buying

Owning a home is not always better than renting. Many factors are involved — including whether you are likely to move, how much upkeep will cost, what you will have to pay in interest. Take a good look at the pros and cons of each before deciding to be a homeowner.

For more, read “To Buy or Rent? How to Find the Answer to That Million-Dollar Question.”

5. Save for a down payment

You can’t borrow the entire cost of a home. You’ll need to put your own money into the purchase — get some “skin in the game,” as real estate agents like to say — with a down payment.

The more cash you contribute, the more affordable the home purchase becomes. For example, putting in at least 20 percent of the home’s price lets you avoid paying for mortgage insurance — which protects not you, but mortgage investors should you default. Also, the more cash you bring to the deal, the less you need to borrow, and the smaller your monthly mortgage payments will be.

For tips on gathering cash, check out “10 Ways to Pull Together the Down Payment for a Home.”

6. Get preapproved for a mortgage

Getting preapproved for a mortgage is not the same thing as being “pre-qualified.” Pre-qualification is an initial screening that lenders typically offer home shoppers. It’s a cursory process: Prospective lenders ask about your debts, your assets and your income, and quote you a rate that you’d probably get if your answers turn out to be accurate.

Preapproval, however, requires you to complete an official mortgage application. You let a lender pull your credit score and check deeply into your financials. You’ll learn exactly how much you can borrow and roughly what your interest rate will be.

With a preapproval, you’ll get a letter from the lender saying that you’ve been approved for a mortgage up to a certain amount. When you make an offer on a home, this letter gives you an edge over buyers who have not yet applied for financing.

Preapproval also tells you exactly how much you can spend, saving you the time and the heartbreak of failing to qualify to buy the home you want.

You may have to shop around, though, to find a lender that preapproves borrowers. A great place to start comparing what lenders have to offer is here, in our Solutions Center.

For more advice, check out “Home Buying — How to Choose the Best Mortgage for You.”

7. Make a list of must-haves

Before the excitement of home shopping hijacks your brain, make a list of the bare minimum features that your new home must have. It must have at least two bedrooms, for example. Or, it must be on one level. Or it must have a yard.

You’ll need to pull this list out again and again as you consider homes for sale.

8. Get to know the neighborhoods

You’re not just buying a home, you’re buying a neighborhood — and all of its sights, smells, noises, architecture, conveniences and drawbacks. It’s a good idea to find a few neighborhoods that you can afford and that roughly meet your requirements. When you choose an agent, you’ll want one who has expertise in those areas.

For more on finding the ideal neighborhood, check out “20 Tips for Buying a Home in the Best Location, Location, Location.”

9. Find a real estate agent

Now, shop for the agent who will help you find a home. Talk with several of them and interview them carefully, asking about their backgrounds, and properties they’ve helped buy and sell.

Choose someone who knows your particular market inside out and who has helped buy and sell a lot of properties in the neighborhoods where you want to live. Chemistry matters, so listen to your gut. Find someone who is sought-after by clients but who is not too busy to make time for you.

For more details, read “Buying a House? Get the Right Pros on Your Team.”

10. Shop for homes

Finally! You’ve arrived at the fun part. It also can be the grueling, heart-wrenching, exhausting and confusing hard part. But now you are well-prepared for your search. Good luck in finding a new home that suits you to a T.

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