Buying Your First Home Might Be Closer Than You Think
Buying a house is one of the biggest parts of the American dream, but that doesn't mean you have to wait for it your whole life. If you take the right steps, you can start on the path to homeownership right now.
Each step builds on the last, and you'll learn more about your needs and challenges as you go. If you run into something you need to reassess, advice is a call or email away. Real estate agents help first-time buyers like you every day.
Here's how to get off to a good start when buying a house:
- Work on Building Your Credit
Strengthening your credit can help you get a better interest rate on your mortgage and may save you thousands of dollars. Aim to pay off (but not close!) any high-interest credit accounts you may have. Don't start on any new financial obligations, such as a car loan.
- Gather Financial Information
Any loan provider you work with will want details of your financial situation. That usually includes three months of pay stubs and two years of tax filings. If you are self-employed or your income varies for other reasons, you may need to submit a longer income history. If you have past issues such as bankruptcies or charge-offs, prepare to explain them.
- Develop a Budget
Tally up your monthly expenses and income sources to figure out how much disposable income you'll have for home expenses. You might find costs you can cut so you can save for your down payment. Remember, you shouldn't spend more than 30% of your monthly income on housing.
- Talk to a Real Estate Agent
Before you talk to a lender, reach out to a real estate agent you can trust. He or she will help you get clear on your needs and develop realistic expectations for the process. A real estate agent will be your best ally throughout the process, answering your questions and steering you toward the resources you need to get to closing day without a hitch.
- Get Prequalified for a Loan
Prequalification is a process where you submit financial information to your lender of choice so a loan package can be issued as soon as you need it. This is essential if you are dealing with "motivated sellers" or putting in a bid on a home that has attracted a lot of prospective buyers.
- Assess Your "Must Haves"
It's time to start making your dreams a reality. Everyone who will be living in the home should come up with a list of five features that they most want from it. Although it's hard to find a perfect home, this will help you zoom in on areas where everyone agrees. You'll also know at a glance which properties don't match your priorities, saving you time.
- Compare Homes and Neighborhoods
This is where your real estate agent shines. He or she should get you off to a running start with a list of neighborhoods that suit you. From there, make time every weekend to attend open houses, tour properties, and look at current listings. You can do it!
- Get a Home Inspection
A home inspection gives you a complete report on the home's condition from top to bottom. Most buyers choose to walk away from homes with electrical, plumbing, or pest issues, and mortgage programs for first-time buyers will not finance homes with certain serious defects.
Buying a house is a lot to wrap your mind around at first, but it's easier than it looks.