What to Do Before Buying a House in the Current Economy

Reader Question: I've been hearing that it's harder to buy a house today, for whatever reason. I'm just getting started with the process, but I don't really know where to start. What are the most important things to do before buying a home in this current economy?

Depending on your financial situation, this could be a great time to buy a house. And because it's a buyer's market in most areas of the country, it's possible to get more house for your money in this current economy. It is also easier to negotiate any items requiring repair, seller-paid closing costs, and other negotiation points. However, due to the current economic crisis we are dealing, it may be a tough time to secure a mortgage.

So before buying a house in this economy it's a good idea to review your financial situation, including credit score, debt-to-income ratio and other factors.

Lenders in many areas of the country have tightened up their requirements due to the subprime mortgage fiasco. Many banks made bad loans and ended up with losses in the billions of dollars. What used to be considered a good, qualifying credit score may not be enough by current standards.

So I would say the first thing to do before buying a house is get copies of all three of your credit reports including the credit scores. This way, you will know what your credit looks like and if your score is high enough to even bother proceeding any further. In order to get the best interest rate on a home loan in this current economy you'll need a score of 720 or higher. You might still get approved for a loan below that number, but you won't get the best interest rates.

If your credit looks good and you have a decent score, the next thing you want to do before buying a house is start shopping for a lender. LendingTree is a good place to start, because you can get online mortgage quotes from up to four lenders at once. It's convenient, and it could save you a lot of time and energy. Visit our online quotes page to learn more.

Once you decide on a lender, set up a time to meet with a loan officer to go over the different types of loan programs and rates. It's always a good idea to come to the meeting armed with pay stubs and bank statements, including any retirement / stocks / bond accounts you have. This way, the loan officer will be able to come up with a clear picture of your debt-to-income ratio and your current assets.

It also helps to narrow down the general where you want to buy a home, and to determine approximately what the property tax rate is for that area. This will help the loan officer come up with a realistic loan amount and monthly payment that you qualify for. Now that you know how much you can borrow to purchase a home, it's time to start looking!

Obviously, these are not the only things to know and do before buying a house in the current economy. But they are some of the most important things you should do. Our website has hundreds of pages of advice on this subject, so be sure to spend some time surfing around here before you go.