Thinking of Buying a House in 2022? Check These Tasks Off Your To-Do List

Don't rush into a decision to buy a home that you end up regretting.

If you're considering purchasing a new home in 2022, you don't want to jump into the real estate market if you aren't 100% sure that doing so is a smart financial decision.

To make sure your choice to get on the property ladder is one that ends up paying off for you over the long run, make sure you check these tasks off your to-do-list before you call up a real estate agent.

1. Check your credit report and score

Mortgage lenders consider a few factors when determining whether to approve you for a loan and setting the interest rate they'll charge you. But your credit history is one of the most important. A good score can mean you qualify for a loan at a competitive rate while a low score may leave you with few choices of lenders and high interest costs.

You'll want to make sure your credit score is good enough to get at least a reasonable rate since you'll be paying off this debt for several years, if not decades. This means you'll have a minimum score of 620 and ideally one closer to 700 or higher. If your score is below this, consider putting off homeownership while you work on improving it.

2. Calculate your debt-to-income ratio

Your debt-to-income ratio (DTI) refers to the level of debt you have relative to your income. Mortgage lenders like your DTI to be below 36% when factoring all of your debt, including your mortgage. And they also like your total housing costs (including mortgage principal, interest, property taxes, and insurance) to be below 28% of income.

If you are above these ratios, you'll likely have a narrower choice of lenders -- if you can borrow at all. Consider working on paying down your debt or increasing your income. Repaying some of your debt can also help give your credit score a boost, as credit utilization ratio (credit used versus credit available) has a big impact on your credit record.

3. Save up enough to cover a down payment, closing costs, and moving expenses

There are a lot of upfront expenses associated with buying a home. This includes a down payment, which should ideally equal 20% of your home's value so you don't have to pay private mortgage insurance. It also includes closing costs, which total 2% to 5% of the amount you're borrowing. And it includes the expenses associated with moving to your new property.

If you don't have the money for these expenses, you could be forced to borrow for them -- which you may not be able to do depending on lender policies. Even if you can get approved, adding extra debt onto your loan makes it more expensive over time. It's worth waiting a bit to make sure you have the savings you need to avoid these extra expenses.

4. Build up a hefty emergency fund

Homeownership means accepting responsibility for repairs and maintenance costs. These are costs a landlord would generally be responsible for when renting. An emergency fund can help you be prepared for these surprise expenses so you don't end up in debt.

You also don't want to risk not being able to make your housing payments in case of a decline in income. An emergency fund helps ensure that doesn't happen. To make sure you're really ready for homeownership, save up an emergency fund with enough to cover three to six months of living expenses before you get serious about buying a home.

By completing all four of these tasks, you can reduce the chances of things going wrong financially after buying a home, and you can make sure you get the most affordable loan possible so your house ends up being a good investment.