Preparing to buy a home for the first time?
Here are some easy steps to get you started.
So, you’ve decided to take the plunge and become a homeowner for the first time. Congratulations!
Owning your own home is a major milestone. But before you start shopping for houses, there are a few things you need to do to get prepared.
Here are five essential steps that will help set you up for success as you enter the world of home ownership.
This means getting a clear picture of your income, debts, and expenses. You’ll need to provide this information to your mortgage lender when you apply for a loan, so it’s best to have it all gathered in one place ahead of time.
Depending on the type of loan you get, you may be able to put down as little as 3% of the purchase price, but aim for 20% if you can swing it. That way, you won’t have to pay private mortgage insurance (PMI), which is insurance that protects the lender if you default on your loan.
You’ll also need money for closing costs, which typically run between 2% and 5% of the purchase price. Consider opening a dedicated savings account to help ensure you have the money you need when it’s time to sign on the dotted line.
Your credit score is one of the most important factors lenders consider when you apply for a mortgage. Be sure to check your credit report and correct any errors as soon as possible.
If your score is on the low side, you can take action to improve it before you start shopping for houses. For example, make sure all your bills are paid on time, every time, and keep your credit card balances as low as possible relative to their credit limits.
Once you’ve gotten a handle on your finances, it’s time to start thinking about how much house you can afford.
Work with a financial advisor or mortgage loan officer to figure out what kind of monthly mortgage payment fits comfortably into your budget, given your income and current expenses.
Remember, owning a home comes with additional costs like property taxes and maintenance, so be sure to factor those in when coming up with an estimate.
Technically, this step isn’t required, but we highly recommend it because it helps streamline the home buying process.
Your loan officer will ask you to submit information about your income, debts, employment history, and assets so they can offer you the best loan options and rates for your situation.
Once you’re pre-approved, you’ll know what type of home you can realistically afford. And when you find the perfect home, the sellers are more likely to accept your offer, knowing that financing won’t be an issue for you.
Becoming a homeowner for the first time is an exciting milestone. By following these five simple steps, you’ll put yourself in a good position, both financially and emotionally, to navigate the process and become a first-time homeowner.