If you’ve made the decision that it’s time to prepare for buying a home, congratulations! This is such a huge and exciting endeavor! The earlier you start doing your research and preparing yourself financially, the better off you will be as you navigate the world of mortgages, pre-approval, negotiating, and budgeting. Although it can seem like a lot to sort through when you are just getting your feet wet, don’t be overwhelmed! I am happy to help with understanding the fundamentals of getting your finances in order as a first-time buyer. Here are some of my top recommendations:
- Start saving in advance. The more you can save for your down payment, the better. Although traditionally homeowners would aim to put down 20% of the cost of the home on the down payment, there are loans available specifically for first-time home buyers that are as low are 3%. However, even a 3% down payment is still a good bit of money that will need to be saved. Another cost to keep in mind and save for is closing costs. These can fall anywhere between 2% to 5% of your loan amount, so you definitely don’t want these to take you off guard. One of the best ways to save for these costs is to automate a monthly amount that is set in a separate savings account. That way, you can set it and forget about it as you build your “dream home” fund.
- Prepare your credit. Another huge factor that comes into play in buying your first home is your credit. Although everyone’s situation is different, you can generally build your credit by following these three guidelines: track your credit to dispute any errors, pay your bills when they’re due, and keep your credit card balances low. Each of these can contribute to better credit that will potentially affect your qualification for a loan and the interest rate a lender would offer.
- Budget carefully. Before you begin the search for your dream home, you’ll need to have a good grasp on your budget. A huge part of getting your budget worked out is getting pre-approval from a lender so you’ll know how much you can borrow for your loan. Also, having a pre-approval letter when you are viewing homes can give you credibility with home sellers and may give you an edge over other buyers. Besides getting pre-approved, you may also want to spend some time with an online home affordability calculator that takes your income, debt, down payment and credit score into account. Play around with the numbers until you find something you are comfortable with, and then you are ready to start shopping for the home of your dreams!
With just a little bit of strategic planning and forethought, you can be well on your way to having your finances in order for your first home purchase! If you have any other questions regarding your specific situation or would like to chat more about these tips and others for preparing to enter the market as a first-time buyer, please don’t hesitate to reach out. You do not have to go through any of the process alone. I would love to set up a buyer consultation with you, help you get in touch with great lenders that I work with, and coach you each step of the way!! It is my pleasure to join you in unlocking new doors, wherever you may be at in the process.