Are you a first-time homebuyer ready to take the plunge and enter the exciting world of real estate? While buying your first home can be nerve-wracking and thrilling but requires careful planning and consideration. To make sure that you hit all of the milestones needed for a successful purchase process, read this comprehensive survival guide for tips on navigating through each step in the homebuying journey.
Check your credit score
One of the first things you need to do before searching for a home is to check your credit score through your credit report. This report will help lenders determine your creditworthiness. Even with debt like student loans, you can still purchase a home with good credit and the right mortgage program. If your score could be better, take the time to improve it before you buy.
Create a list of Needs and Wants
Next, create a list of Needs and Wants for your future home. Needs are things that, you guessed it, need. These can be anything from “I need at least a two bedroom and two bath to accommodate my family” to “I need enough of a back yard so my dog can safely go outside.”
Know how much you can afford
Everyone has what is called a debt-to-income ratio (DTI). Along with your credit score, lenders will use this number as a percentage to determine your eligibility for a qualified mortgage. The general rule of thumb is to keep your overall DTI at or below 43%.
Save for a down payment
Once you have decided to purchase a home, it’s time to start saving up for a down payment. This is the money you give the buyer upfront upon purchase; traditionally 20% of the total purchase cost.
Research your mortgage options
It’s important to research your mortgage options before buying a home. Knowing what you can afford and the different types of loans available will save you hassle when making an offer. Looking into various lenders is wise since getting pre-approved for a loan can lend you a competitive edge in negotiating price. Knowing the terms associated with interest rates and other fees is essential when balancing what you want and what fits your pocketbook.
Get pre-approved
Before you start shopping for a home, get pre-approved for a loan. A pre-approval will show you how much your lender will lend to you. You must provide your lender documents like bank statements, rental information, valid identification, and federal tax returns.
Pre-approval not only helps you stay within budget but makes you a more attractive buyer, as sellers will see that you have the backing of a lender.
Find a local real estate agent
Finding the perfect home for your lifestyle and budget is no small task. Hiring a local real estate agent can save you time, stress, and money while helping you secure the best deal. Merchant of Homes provides experienced professionals who understand the local market trends to help you meet your objectives.