The very first thing every first-time home buyer needs to determine is what he or she can afford. When calculating your budget, include all additional costs, such as insurance premiums, homeowners insurance, property taxes, HOA fees (if applicable), etc. Once you have determined your budget, you will know which homes are within your budget.
As a first-time buyer, you probably have some funds set aside to make a down payment on home. It is recommended to have approximately 20% of the purchase price available for down payment and expenses. However, there are several loan and mortgage programs that will allow you to put down a significantly lesser amount. There are other loan programs that can help you make a down payment. Know your options before you get started.
Purchasing your first home is one of the biggest financial decisions you will make, and you want to be prepared. Gather necessary documents, such as your credit report, and identify any problems with your finances so you can fix them ahead of time. There are a number of free resources like Credit Karma and annunalcreditreport.com to help ensure you’re credit ready.
As a first-time home buyer, it’s important to hold off on any large credit purchases, such as a lease or car loan, as it can impact your debt-to-income ratio. This number will directly affect whether you qualify for a loan. So, if possible, wait to make any large purchases with credit.
To make the buying process easier, know where you stand with lenders. If you have a credit score of 720 or above, you can shop around for a loan with the lowest interest rate. However, if you have a lower credit score (580+), you may be restricted to certain financing options and sometimes higher rates. There are still many promising options available. Speak with the lender to determine the best option for you.
Some lenders require your down payment must be in your account for a set amount of time. It’s crucial to know these conditions to ensure that the closing on your dream home isn’t delayed.
You are likely going into the home buying market with an idea as to what you’re looking for. Carefully consider the kind of home you want, and separate the needs from the wants. For instance, you must have a 3 bedroom 2-bathroom home with a garage in a specific area or school district. You may want a 2,000 sq. ft. home with a pool but know that this is a want and your budget my not account for it. This will narrow down your search for homes that meet your needs.
If you’re interested in owning a home in a specific area, connect with a local real estate agent that is familiar with that area. He or she will have invaluable experience and knowledge about the neighborhood and local matters such as schools, new developments, and any issues.