15 Steps You'll Need to Take Before Buying a Home

Making the decision to buy a new home affects every part of your financial life. It's not something to jump into until you've accomplished some key tasks.

Specifically, here are 15 things you'll likely want to do before becoming a homeowner to make sure you're truly in a good position to invest in a property.

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Mortgage lenders will pull your credit report before agreeing to give you a home loan. You'll want to know exactly what they will see.

Credit reports can sometimes contain errors, which take time to correct. Or lenders may display negative information that is too old and should have dropped off your report.

Before you move forward with purchasing a home, you'll want to fix these issues and understand how potential lenders will see you. Otherwise, your mortgage could cost you much more than it needs to, making homeownership a lot more expensive.

ALSO READ: How Does Your Credit Score Affect Your Mortgage Rates?

Unless you already have a great credit score, you'll probably want to work on improving it as much as possible before buying a home. That's because your mortgage will likely be your largest debt, and you want the best credit score you can get to qualify for the lowest possible rates.

Some quick ways to improve your credit include asking a loved one to name you as an authorized user on a credit card with a solid history or you could ask a creditor whether they might be willing to remove a negative report from your credit record if you have been mostly a good customer over the long run.

If you have too much debt, lenders may be unwilling to give you a mortgage because they fear you won't be able to make the payments. Too much debt can also hurt your credit score, compromising your ability to get an affordable mortgage loan.

While repaying debt can improve your financial credentials, it also helps ready you for homeownership. If you owe a lot on other things, you could find it more difficult to afford the costs of owning your own property.

ALSO READ: When Should You Prioritize Retirement Savings Over Debt Payoff?

Before buying a home, you should decide how much you want to spend. Consider the monthly cost of your potential future mortgage and other expenses related to the home you may buy. And think about the interest you will pay in the long run.

Lenders will give you a maximum amount you can borrow, but it's best to do your own math first and decide how much you personally are comfortable spending. That way, you'll be less inclined to borrow more if the lender approves you for a larger loan than you really believe is right for you.

It may be tempting to just go to your local bank and apply for a mortgage. But while it's OK to get a quote from the bank you do business with for other things, you also want to broaden your search.

There are local and national banks that issue mortgages, as well as credit unions and online lenders. The costs of loans can vary a lot with different financial institutions, so you should not move forward with buying a home unless you have shopped around to find the most affordable loan to pay for it.

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After finding a mortgage lender you like, you will want to reach out to the lender, submit an application and your financial details, and get a preapproval.

Once you are preapproved, you'll be able to show that you are very serious about your purchase when you make an offer to buy a property. Sellers will also have less reason to worry that a bank will decline your loan and leave you without the funds needed to follow through with buying the property.

Preapproval also helps you understand what mortgage terms you are likely to qualify for, so you can decide whether a given loan is within budget.

ALSO READ: How to Get Preapproved for a Mortgage

The traditional home down payment was 20% of the home's value, but lots of people put down far less money now. Still, in most cases, you will have to pay at least some money out of pocket toward the home rather than getting a mortgage for 100% of what you pay for it.

The bigger the down payment, the less risk a lender will lose money. So, you should also be able to qualify for a loan more easily and be offered a lower rate if you have a good amount of money to put down.

If you can come up with 20% to put down, you will not have to spend more money to protect the lender by buying the required private mortgage insurance.

ALSO READ: What Is Private Mortgage Insurance?

There is a ton of fees homebuyers must pay when a property is transferred to them, and they close on a loan to buy it.

These fees, called closing costs, can add up to around 2% to 5% of the total amount borrowed. Since this is a big added expense, you should not move forward with buying a home until you have money saved to pay these fees up front.

Although borrowing for them is a possibility, this will usually lead to paying more interest over time.

ALSO READ: How Much Should You Budget for Closing Costs?

Moving can be a big hassle and another huge expense you will have to pay upon moving in. Decide how you will facilitate the relocation of your possessions and get some estimates on cost. If you can't cover moving expenses, you'll need to save more before buying a home.

If your mortgage exceeds your current housing costs, you should practice making such a large payment. That way, you can find out before you buy whether such big housing expenses will leave you with too little money or cause you financial stress.

You can practice by paying the extra into savings. Here's a simple example: Say you are paying $800 for rent and will have $1,000 mortgage payments if you buy a home. Put the extra $200 you will have to pay after becoming a homeowner into a savings account for a few months. Then, make sure you are OK with living on what's left.

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Homeowners should have an emergency fund. This isn't just to cover unexpected repairs, although the money very well may be used for that. You also want emergency savings to make sure you won't risk missing a mortgage payment if there are bumps in the road.

If you have less than three to six months of living expenses saved for emergencies, consider focusing on bulking up this account before buying a home.

ALSO READ: Your Emergency Fund: How Much Do You Need to Save?

You aren't required to have a real estate agent to buy a home. But it's a good idea to find one before moving forward with a purchase.

Your agent will advise you on price and other related issues, using their knowledge of the local market. An agent can also help to protect your interests in other ways throughout the transaction.

Best of all, you don't have to pay for the agent as a buyer. The seller pays the realtor fees for both parties, even though your buyer's agent has a duty to work in your best interests.

It can be helpful to look at how property values are trending before you buy. If you see seriously inflated prices and fear a bubble, it may be worth waiting to move forward with your home purchase. Knowing what homes are worth can also help you make a fair offer when you find a property you are interested in.

ALSO READ: Home Prices Are Up More Than the S&P 500: How Real Estate Investors Can Take Advantage

When you buy a home, you will want to make sure you are comfortable in the community you will be joining. You also want to know the rules for what you can and cannot do in your home after purchasing it. And you will want to make sure there are plenty of nearby amenities and that you have a good commute to work.

You can't check all these boxes and find a property offering the right features if you don't learn about the neighborhoods and homeowners associations in your target location.

Finally, think about how long you plan to be in the home before you buy it. If you won't be remaining in the house for at least several years, you will be unlikely to be able to sell for enough to make back all you spent and cover closing costs. Renting may be a better idea at this time in your life.

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If you've completed these 15 tasks, chances are good you are truly ready to buy a property. Now all you have to do is find the property of your dreams and get an accepted offer.