Purchasing a home is a monumental decision, whether you’re new to the homebuying process or if you’re an experienced home buyer. Making such a large investment will incite some anxiety and nervousness in anyone until it’s a done deal. However, the home buying process has the potential to be the most intense and confusing the very first time around.
As a first-time home buyer, you may feel as though your head is spinning from taking in all of the lingo associated with real estate, mortgages and everything else involved in buying a piece of real property. While you will likely feel somewhat unsettled until closing day, there are some things you can do to avoid becoming completely overwhelmed throughout the home buying process.
1. Track your spending for several months before starting your home search.In doing so, you’ll get extremely familiar with how much money is coming in and going out of your bank account each month. This will give you a better idea when it comes to determining your ideal price range.
2. Save for a down payment.The earlier you start putting money aside for a down payment, the better. Although it is possible to buy a home with no down payment, being prepared with a decent down payment will lower your chances for needing mortgage insurance, and will lower your monthly mortgage payment.
3. Check your credit score(s).You’ll want to do this as soon as you start contemplating buying a home, because you may need time to boost your score before applying for a mortgage pre-qualification. Be sure to check your credit reports thoroughly for any errors as well. If you find any, contact the reporting credit bureau about correcting the errors.
4. Thoroughly consider your long-term goals.Although you may be purchasing a home on your own or as part of a couple, look to the future – do you plan to have children? Are you settled in your geographic area? Will there be potential job changes that may require you to move?
5. Determine the type of housing that meets your short and long-term goals.Depending on your current and long-term plans, decide whether a townhouse, condo or single-family home is right for you. Are you into DIY? If so, a fixer-upper may be a great choice. A newer home may suit you if you’re interested in a home that’s move-in ready.
6. Consider all expenses associated with buying a home.Beyond the cost of the house, remember to calculate interest, property taxes, homeowners insurance, utilities, closing costs, inspection fees, title fees, homeowners association dues and any other expenses that will be your responsibility.
7. Get familiar with home prices in your target area.Once you know what type of house you want and have completed the above steps, start pricing homes that fit the bill.
8. Verify how much house you can afford.By carefully watching your budget for several months, considering all costs associated with buying a home and pricing homes in your area, you should have a ballpark idea of how much house you can afford.
9. Organize necessary documents.At the very least, your mortgage lender will want to see your two most recent pay stubs (or proof of income if you’re self-employed), the past two years’ tax returns and at least two months of concurrent bank statements.
10. Get pre-qualified.To make it official, you can get pre-qualified for a mortgage loan before you even view any homes. Your mortgage lender will write you a pre-qualification letter stating how much money they think you can safely borrow. Sellers take pre-qualified buyers much more seriously than those who have not yet taken this step.
Additionally, you’ll want to be sure to set aside funds for costs associated with moving so you’re not caught off-guard on moving day. Examples of costs that will arise after the closing date include: moving company or truck rental fees, paint, carpeting, appliances, furniture and home décor. Once you’ve checked off everything on your list, you’ll be off on your new adventure as a homeowner!