10 things you must do before you buy a house in the Austin area
For most people, buying a house is the largest financial transaction of their lives. So it’s crucial that you prepare yourself for the process by doing some real estate homework. Here’s a helpful top-ten list to get you started — ten things you must do before buying a house in Austin, Texas.
1. Study the home buying process.
When you are well informed about a particular process, you are able to navigate that process with confidence and certainty. This is true of buying a house in Austin or anywhere else for that matter. Home buying lingo is a big part of this, so be sure to read through a few real estate and mortgage glossaries before you start house hunting.
2. Obtain your credit report and credit score.
Order a copy of your credit report and look it over for accuracy. You should also obtain your credit scores so you can see how you stack up against the national average — above average, middle of the road, or below average. Austin mortgage lenders will review your credit with a fine-toothed comb, so you should do the same … before they review it.
You can usually find free trials and special offers on ordering your credit scores and reports at the following address: www.HomeBuyingInstitute.com/credit.php
3. Fix credit errors quickly.
If you find any errors while reviewing your credit report, be proactive about correcting them. You can do this by visiting the company’s website where the report came from (TransUnion, Equifax or Experian) to request a correction. These companies are required by law to review all correction requests in a timely manner. It can take time to clean up an erroneous credit report, so get started as soon as you spot the error.
4. Check your debt-to-income ratio.
When buying a house in Austin and shopping for a home loan, you can bet that mortgage lenders will review your debt-to-income ratio. This is the ratio between what you owe (debt) and what you make (income). Most Austin mortgage lenders prefer a borrower’s debt to be at or below 20% of net monthly income. If your debt is more than 20% of your net monthly income, work hard to reduce your debt as much as possible before applying for a mortgage loan.
5. Determine your real estate budget.
How much house can you afford? Before you venture out on house hunting trips, you need to answer this fundamental question. Use a mortgage calculator to determine how much you can afford to pay each month, and what that equates to in terms of a home price. You can find plenty of mortgage calculators online, and most are free to use. Run some numbers to find out where your comfort zone lies. This way, you can weed out the Austin houses that are beyond your budget.
6. Start saving your cash.
Saving money before trying to buy an Austin house is one of the best things you can do, for a couple of reasons. For one thing, mortgage lenders want to see that you have some cash reserves on hand. Secondly, you’ll need cash reserves for any unexpected fees or costs that might arise (which is common).
7. Get pre-approved for an Austin mortgage loan.
During the pre-approval process, a mortgage lender will look at your finances, debt, credit score, etc. to conditionally qualify you for a certain amount of mortgage. Sellers will take you more seriously if you have a pre-approval letter, because they know you are likely to receive final approval for a loan. The pre-approval process also helps identify any problems with your credit or other qualifying factors.
8. Avoid new lines of credit.
When you are in the market for an Austin house it’s best to keep your credit situation stable and favorable. You can do this in a number of ways. First, try to pay down some of your debt, if at all possible (item #4 above), but don’t forget to save up some cash at the same time. Most importantly, you should avoid taking out a new loan / line of credit. At best, this could make the mortgage-qualification process harder. At worst, it could tip the debt-to-income scales into the “greater than 20%” zone, which will make it even more difficult to get a loan.
9. Validate the asking price.
When buying a house in Austin it’s important to validate the asking price. After all, it’s called an “asking price” for a reason — it’s what the sellers are asking for, but it’s not necessarily what they will get. Depending on the real estate market at the time, the seller might get more or less than they are asking.
No asking price is set in stone, and everything in real estate negotiable. So don’t accept an asking price as being reasonable until you validate it through careful research. Compare the home / price to recent sales in the area. Your Austin real estate agent can provide a comparative market analysis (CMA) to help you with this step.
10. Get a home inspection.
A home inspection is always a smart idea when buying an Austin house you know nothing about. A house is a sizable investment, and the last thing you want is to find a bunch of things wrong with it after you’ve taken ownership. Home inspections are very affordable, and you cannot put a price on the peace of mind you’ll have as a result of your inspection.
