As the pandemic winds down, people are beginning to be able to focus on their lives again, and for many, that means buying a home of their own. However, navigating the housing market can be a difficult and confusing undertaking to tackle on your own. Here are some basic steps to help guide you through the house-buying process.

Buying a home, like all other major purchases in life, requires you to take a good look at your finances and other personal circumstances to ensure that you’re financially prepared to buy a home. That’s why your very first priority should be preparing for and going through the preapproval process. Essentially, getting preapproved for a mortgage involves a potential lender sitting down with you, going over your finances, and coming up with a lending offer. The terms of this offer are dictated by the state of your finances, i.e. the higher your credit score the better the rate you can qualify for. Some factors you should keep in mind during this process are as follows:

Credit History

Working with a creditor to go over old credit reports and rectify any errors can save you a lot of headaches down the road. With these issues taken care of before you apply, you can confidently go into a meeting with a lender.

Income, Finance, and Personal Information

You’ll need to have information like your Social Security Number, current address, bank and financial information, proof of income, and employment details for both you and your co-borrower, should you have one. Documents like your W-2 tax form and 1099s should be on hand to present to the lender. Most lenders look for two years of continuous employment, but there are always exceptions. Those who are self-employed applicants should be prepared to show two years of income on their tax-returns. Essentially, any money you have going into this purchase should have a clearly documented paper trail.

Credit Score

You should know where your credit stands before you reach out to a lender. Generally speaking, a score of around 620 is a good baseline. However, the higher the score, the better the rate you will qualify for. A score of 740 or higher will generally qualify you for the best mortgage rates.

Debt-to-Income Ratio

Your debt-to-income ratio, or DTI, is the amount of your monthly income that you put towards paying off debts, like credit cards, car payments, or paying off student loans. There are several free online calculators that you can use to help figure out your ratio. Generally speaking, most lenders prefer borrowers to have a DTI of 36% or below (including the mortgage), but this figure can be higher in some cases.

Contact More Than One Lender

In this process, it's important to compare and contrast the offers different lenders will give you to make sure you are getting the best rate and deal for your situation, potentially saving you thousands of dollars in the process. The Andover Lending Team is certainly a good place to start.

Once you’ve gone through the pre-approval process and have ensured that your finances are sound, you’re free and clear to hash out an offer with your real-estate agent, make said offer to the seller, and start the closing process on your new home. Having a good realtor by your side during this time can make all the difference in finding a good home that won’t break your bank, so it's important that you take your time and find somebody who’s a good fit for you.

While all of these steps may initially seem like a lot of work, it’s well worth the effort knowing that you could potentially save yourself hundreds on your mortgage payment.