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How to shop for a house, in 3 steps with 6 online tools

Buying a house can be complicated. There are just so many things to check off the list before the process is complete and you’re finally in your cozy new home.

The good news is, you can alleviate part of the stress by doing some of the legwork ahead of time. There are tons of resources online that you can use to get a nice head start.

That’s why we’re going to share 3 essential steps for home buyers with you. They will help make it as painless as possible.

(PssT! If you’re thinking of selling your home, tap or click here to read our tips to find out how much it’s worth.)

Step 1: Knowing your credit is key

Before beginning the long, arduous journey of buying a house, you should find out as much about your credit as possible. This is key, because your credit score affects the interest rate you will pay on your mortgage.

The higher credit score you have, the lower the interest rate. Which obviously means, the lower your credit score, the higher the interest rate will be on your mortgage.

Having an idea of what interest rate you’ll qualify for is important to know ahead of time so you have an idea of how much you can spend on a new home. You might be surprised at just how much the interest rate can change your monthly payment.

Plus, there could be mistakes on your credit report that you don’t know about. Looking over your report before starting the home-buying process would give you the chance to clean up any errors, so you get the best rate possible.

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Here are a couple resources to learn about your credit:

Check your credit for free

Federal law requires each of the three nationwide consumer credit reporting companies to give you a free credit report every 12 months if you ask for it. You can get yours from Equifax, Experian and TransUnion at annualcreditreport.com.

And don’t be fooled by look-alike sites. Lots of sites promise credit reports for free, but this is the only official site explicitly directed by federal law to provide them.

Important note: Annual Credit Report is completely free. It will not ask for your credit card number or a verification fee. If you see anything asking for payment information, you are in the wrong place. Do not enter any information!

Keeping an eye on your credit report is crucial. If an identity thief opens a new credit card, takes out a loan, or does anything else credit-related in your name, it will show up. The bad news is, credit problems can keep you from qualifying for a loan. So, check your credit report regularly and you can catch the identity theft before it’s too late.

To handle credit report requests, the three major credit reporting companies set up the Annual Credit Report site. Just go to the site and click the “Request your credit reports” button and follow the steps.

Keep in mind, you will be asked to enter your Social Security number. That’s so the credit companies can verify they’re pulling the right report.

When looking over your credit reports, make sure you recognize the information that’s on it including your personally identifiable information, such as names, addresses, Social Security number, accounts and loans. Then verify the other information is accurate and complete.

If you find anything that you believe doesn’t belong to you or is wrong, contact the business that issued the account or credit reporting company that issued the report.

Compare your credit to national averages

Credit Karma tells you your credit score completely free, with no credit card needed. And it isn’t just a one-time thing; you can look at your score regularly without any negative impact to your credit. The entire process takes less than 2 minutes.

Not only can you see your score, you can see how it compares to the national average and what elements are helping or hurting. You’ll quickly know the areas you need to improve. Credit Karma even has free tips on ways to boost it.

Be aware that the first time you request your credit score, Credit Karma will ask for your Social Security number. It only requires this to get your score the first time. However, Credit Karma says it never stores your SSN anywhere on its servers and keeps no records of what it is.

I know there are plenty of sites out there that promise you a free look at your credit score and then try to charge or scam you. This isn’t one of them; it’s truly free, fast and easy.

Step 2: Figure out how much house you can afford

When you apply for a mortgage, you will qualify for a certain amount. Lenders take several factors into account to determine how much you qualify for: debt-to-income ratio, credit score and down payment, to name a few.

However, just because you qualify for a certain amount doesn’t mean you have to spend that much. In fact, it’s a good idea to use a few calculators to get an affordability range, but also do your own homework to calculate your total monthly expenses. Keep in mind regular recurring expenses for:

  • Insurance premiums
  • Utilities
  • Car payments
  • Student loans
  • Memberships and subscriptions (they add up)
  • Miscellaneous expenses (food, clothing and entertainment)

Here are a couple online resources that will help.

How much house can you afford?

You can use this Affordability Calculator from Zillow to help determine how much house you can afford. It’s super easy to use.

Here’s what you’ll need to know, before you use it:

  • Income
  • Down payment
  • Monthly debts

For a more detailed result, click on the advanced tab just under the down-payment box. You can enter optional details like interest rate, loan term, property tax, home insurance and HOA dues.

Once you enter information, Zillow estimates the total value of the house you can afford, along with what the monthly payment would be. Select the payment tab to see estimates for principal, interest, taxes, homeowner’s insurance and private mortgage insurance.

Select the Full Report tab and it will show you a complete picture of everything: monthly budget, payment breakdown, amortization and more.

Alternate site for calculating mortgage payments

This Bankrate Mortgage Calculator works similarly to the previous calculator from Zillow. Begin by entering the price of a home that you’re thinking about buying. Then enter your down payment amount, the length of the loan and the interest rate. If you’re not sure of an interest rate, Bankrate suggests estimated mortgage rates based on lenders near you.

For a more detailed result, select the advanced options tab. Enter the ZIP code of the home, your credit score, property tax amount, homeowner’s insurance amount and HOA fees if there are any. (Note: If you have a particular house in mind, this information can be found on most property listings.)

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Once you’ve entered all the data, a payment breakdown will be shown. It’ll tell you what the monthly payment will be, broken down into different amounts including principal and interest, homeowner’s insurance, property tax and HOA fees.

Step 3: Online tools to search for homes

Even if you work with a real estate agent, if you’re like 50% of the 127 million homeowners in the U.S., you’ll shop online before you buy a home, according to the National Association of Realtors. You’ll find dozens of sites to search for properties, and most pull from the Multiple Listing Service. What makes some better than others is the speed and frequency that property records are updated.

Here’s a tip: Your real estate agent will have the most up-to-date live listings.

Realtor.com 

Realtor.com can help you find the perfect home that fits your situation. It’s simple to use and, according to Consumer Reports, 90% of its listings are updated every 15 minutes.

Go to the home page and enter an address, ZIP, or neighborhood that you’re thinking about and click the search button. It will take you to a page full of listings in the area. Then you can narrow your search by entering minimum and maximum prices, number of bedrooms and bathrooms,  type of property (condo, house) and more.

If you select the More Filters tab, you can really narrow the search. Filters include home size, lot size, the age of the house, number of stories, the number of days it’s been listed on the site and more.

Trulia

Doing a basic search on Trulia works similar to the one on Realtor.com. Enter an address, neighborhood, city, or ZIP and you’ll be taken to a page of homes for sale. And just like Realtor.com, you can add filters to narrow your search.

But with Trulia, you can learn about the area that you’re thinking about moving to. Click on the “Local Info” tab at the top of the listings page and you’ll unlock a treasure trove of important information.

First, it will show you an overview of the real estate market in that area. You’ll learn the median sales price, price per square foot and median rent per month in the area.

Then, it’ll give you some local market trends. You’ll see how the market has performed in the area over the past year.

The next bit of data is something you’re really going to want to know. It covers local crime including the number of arrests, and the most frequent crimes over the past year. This information can really help to keep you from moving into a bad neighborhood.

Other information you’ll see deals with area schools, demographics and even how most people in the area commute to work. At the bottom of the page it gives you a list of nearby cities that you might want to check out.

That’s it, that’s the list of essential steps that prospective home buyers should begin with. Now that you’re armed with this knowledge starting the process will be a breeze. Good luck and remember, have fun!

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