Buying a home is the biggest investment most people will ever make. Once you’re ready to purchase your own home you need to know what to expect. It can seem like an intimidating venture, but with a little knowledge the transaction can go smoothly and you’ll be a proud home owner!

One of the best things that you can do to prepare to purchase a home is to work on your credit score. You may have to pay a small fee to get a credit report, but you really need to find out what your rating is. If you have any delinquent bills or unresolved issues on your report, try to get them all taken care of.

The higher your credit rating is the better, but it should be at least 620. A higher credit rating will get you a better interest rate on your mortgage and lower monthly payments. And, a lower interest rate can add up to thousands of dollars over the term of your loan.

Your down payment will range between 10 and 20% of whatever the home appraises for. Some homes will appraise for more than the asking price and some for less, so you may need even more down. On top of that you’ll have to pay closing costs which are an average of 6% of the amount of the loan.

Just like you shop for a home, you should shop for a mortgage loan. Different lenders often offer different mortgage rates and different terms. Check out several lenders to make sure that you get the best deal possible on interest rates and even monthly payments required.   

The most important part of choosing a home to buy isn’t location, it’s choosing a home that is within your budget. Knowing what ratios that lending institutions are using to judge whether you will even qualify for a loan will help you set a payment goal.

The most commonly used ratios are 28 and 36, this simply means that you must be able to cover your housing costs with 28% of your gross income. The higher number is used to determine your monthly expenses, all of them combined must not be more than 36% of your gross income. If your monthly bills are higher than 36% you might want to consider trying to pay some off before trying to purchase a home.

Before you even talk to a real estate agent, get pre-approved for a loan. Don’t limit yourself to one lender, check out several so you can choose the best terms. This is also the best way to know exactly what to expect as far as mortgage amounts.

After you’ve decided upon an loan amount with payments that you can afford to pay, stick to it as closely as you can. And, make sure that you tell the real estate agent what your price range is. This will save you lot’s of time in looking at homes you can’t afford and also keep you from falling in love with one that is too expensive for your budget!