You’re searching for your first home; how exciting! It may feel a bit overwhelming, but we’re here to help you simplify the process. Here are seven items for your to-do list.
This may seem like the obvious one, but it’s a necessary reminder. At this point, you likely have an idea of what closing costs look like, but unexpected expenses happen. It’s better to save more than you think you need than to come across that dream home with a needed fix you didn’t budget for. Start this step as early as possible in your home-buying process and don’t touch that savings account.
2. Build Credit
Mortgage approvals and interest rates are largely dependent on your credit score. Even though some banks offer mortgages to first-time buyers with a lower score, the higher you can build it the better. How do you build credit? Pay all bills on time. Do not open a new credit card or make any purchases requiring a credit line or loan. This ups your debt to income ratio, negatively affects your credit score and could invalidate your mortgage approval.
3. Calculate Affordability
Sometimes what the bank will approve you for feels like a bigger payment than you can afford to make, and it likely is. Get real with yourself and think about how much you’re looking to spend monthly. Consider utilities and upkeep. A good rule of thumb is to remember mortgage expenses shouldn’t exceed 30 percent of your monthly gross income.
4. Define Must-Haves
When picturing your first home, what are your non-negotiables? Try not to get granular but instead think big picture. Is it aesthetics, like windows or high ceilings? Is it functional, like an open concept or large kitchen? Imagine the spaces you’ll spend the most time in. Draw up the wish list in order of priority and consider the costs that come with each want or need.
5. Choose a Realtor
This is the person who will guide you through the buying process, so it’s important to find a good fit. Consider what kind of guidance you need. Are you unfamiliar with the local market? Need advice negotiating? Not sure what a fair offer looks like? Realtors are here to simplify the process. And even better, the cost of using a realtor is taken care of by the seller.
6. Mortgage Approval
Now that you’ve done some prep work, you’re ready to talk to a loan officer. Choosing who to work with is ultimately up to you. Talk to people you trust and get recommendations. Consider banks as well as mortgage lenders. Don’t jump the gun; shop around for the best deal. There’s nothing wrong with talking to multiple lenders. Choose a primary and backup lender.
7. Start Looking
This is where the fun begins. Keep your must-haves in mind and be sure you’ve communicated them to your realtor. That being said, maintain an open mind. Give houses a chance, and they may surprise you. You’ll likely be looking at a variety of properties, so take pictures. While home buying can be stressful, it’s also exciting!
Trust the process. Let’s find your dream home.