Get Ready to Buy Your First Home
Buying a home is difficult but there are resources available that can make it easier!
As a first time homebuyer, you should make sure that you're fully prepared for the process of buying a home before you begin. This will help speed up the process and save you money in the long run! Make sure that you do your research, find a trusted realtor, and look into first-time buyer programs. You can also ask friends and family for referrals to people who can help guide you through the process of buying your first home!
Check your credit score to see how you measure up.
Check your credit score. Lenders like to see a credit score of 740 or above, so if yours is lower, take steps to improve it as much as possible. Good credit can help you land a lower interest rate and save you thousands of dollars over the life of the loan.
Save up for a down payment. In order to get the best rates on a mortgage and make sure you're approved for the right amount, most lenders want your down payment—the money you'll pay upfront for your home—to be about 20 percent of the purchase price. The more money you can save before buying, the better off you'll be with lenders and interest rates.
Get preapproved from a lender. This is an important step many first-time buyers skip in their home buying journey—and it's one that could save them time and money! Getting preapproved means a lender has looked at all of your financial information (pay stubs, W2s, bank statements) and determined how much they would be willing to lend you based on what they see in those documents. The lender will also let you know what interest rate they'd likely offer you, which helps set your expectations when shopping for homes in your price range.
Fix any errors on your credit report.
When you're getting ready to buy a home, one of the smartest things you can do is to make sure your credit report is in tip-top shape. You'll want to check that all the information listed on your credit report, like your name and address, are correct.
You should also look over the negative items on your report, such as late payments or collections accounts. Any errors in these details could lower your score and possibly impact whether or not you get approved for a loan. If everything looks accurate but bad, don't worry. We've got some tips for boosting your score fast!
Figure out how much you have saved for a down payment.
The first thing you’ll want to do is figure out how much you have saved for a down payment. A down payment is the initial payment you make toward buying a home and it’s different from your closing costs, which will come later on. A down payment generally ranges between 3-20% of a home’s purchase price and can vary based on the type of loan you choose. That means if you are looking to purchase a $300,000 home, your down payment could range from $9,000 to $60,000.
So how much should you save? The answer depends on the type of loan that works best for your situation. Our general recommendation is to aim for 20% unless you’re going with an FHA or usda loan type—in which case it may be possible to put less than 20% down.
Get preapproved for a loan so you know what kind of budget you're working with.
Figure out your budget.
The difference between pre-qualified and pre-approved.
There are two ways to get an idea of how much you can afford before you start looking for a house: pre-qualification and pre-approval. Pre-qualification is simply the bank's estimate of how big a loan you'll qualify for, based on a conversation you have with your lender about your income, assets, and debts. Pre-approval is when the bank has looked at all that information in detail, as well as your credit score and history. It's more reliable than pre-qualification because it requires that you provide all your financial details up front—but it doesn't guarantee that the bank will actually approve you for a loan if they do an even more thorough review later on. Both are worth doing, but if you're going to make an offer on a house, it's better to have been pre-approved in advance so there won't be any surprises down the line.
Look into first time buyer programs to see if you qualify for any special programs that can help you save money.
First time buyer programs are not limited to first time buyers. They can be used by repeat buyers with the same restrictions and requirements. Many of these programs require a minimum credit score and minimum income. Look at your state housing agency's website for available first time buyer programs in your area and see if you qualify. Most states have some type of program that will help you with down payments and/or closing costs, as well as help you acquire a lower interest rate on your loan. If you don't qualify, keep working toward the goal of qualifying for one of these programs so that the next time you apply, your application will be approved.
Set a realistic budget.
The first step in buying a house is setting a realistic budget. Before you begin, it's important to know how much you make per year and how much you have saved for a down payment. Once you figure out these numbers, think about how much you can afford for monthly mortgage payments and set your ideal home price.
While setting your budget, don't forget about other costs associated with owning a home, such as taxes and insurance. Calculate these costs before making a final decision on what type of house to buy and where to buy it.
Choose a realtor. Ask friends and family for referrals, and find someone who has your best interests in mind, not just their own bottom line.
Once you are ready to begin the search for your first home, choose a realtor. There is no shortage of realtors out there and it can be a bit overwhelming to choose one. Ask friends and family for referrals, and find someone who has your best interests in mind, not just their own bottom line.
Ask your realtor questions about things like experience in the field, knowledge of the local market, and how they will help you along the way. It is important that you feel comfortable with this person, who will be guiding you through many of the ins-and-outs of purchasing what will likely be your largest purchase. They should also keep up on trends in homes in your area so that when it comes time to sell this home down the road, they can help you get top dollar.
Decide where to buy.
This can be influenced by a number of things - whether or not you want to live in the same neighborhood as your family or friends, the size of the home, whether or not it's close to your job, etc. It's important to work with your real estate agent on this decision, but it's also important to trust your gut instinct here. If a house doesn't feel right to you, listen to yourself!
The next step is to start looking at homes that are for sale in the areas you're considering. This will be your chance to decide exactly what type of home you want - townhome, condo, ranch, etc. You'll work with your real estate agent on this step, but it's important to trust your gut instinct as well. If a home doesn't feel right, then it's probably not going to be the right place for you.
The rest of the process will go fairly quickly: submit an offer on the property you want, negotiate until you reach a deal that works for both parties, and then close on it!
Betty SamplesBetty SamplesRealtor | Listing Leaders219-488-7570
