A Simple Guide to Buying Your First Home
Owning your very own home is an integral piece of the American Dream, a goal that people young and old alike strive to achieve. However, despite its excitement, the actual process of buying a home can feel rather daunting. Terms like credit score, preapproval, down payment, and mortgage might leave you with a sense of being overwhelmed, but it doesn’t have to be that way. This simple guide will walk you through the basic steps of buying your first home so you know what to expect.
What Can You Afford?
This is really the magic question. You have surely seen magnificent homes with stunning outdoor landscaping and open, sweeping floorplans that you would love to own, but are those homes within your budget? Many first time homebuyers are tempted to stretch the limits of their budgets in order to buy a bigger, more impressive house, but eventually those monthly mortgage payments become unsustainable. Financial professionals will offer varying advice, but in general you want to select a home that will create a mortgage that is far less than 30 percent of your monthly salary. If you ignore this advice, you risk becoming “house poor,” which means you live in your dream home but can’t afford to do much else, including paying bills!
Become Familiar With Mortgage
The mortgage process, especially the underwriting process in which your financial qualifications will be analyzed, might feel scary, especially if you have had hiccups in the past. Not to worry, because there are different ways to prepare for the mortgage process. There are three things you need to help your home buying experience go smoothly: a decent credit score, verifiable income, and closing money.
At least six months before you begin applying to buy your home, use a credit score service to obtain your credit score and check for problems or errors. There are techniques you can use to boost your credit score, like bringing down credit card balances and paying off recent debts if possible. At the same time, you need to set cash aside for your down payment and other closing costs. Most buyers need between 3 and 20 percent of their purchase price. Finally, get all of your paperwork ready that proves your income, such as W-2s, bank statements, and tax returns.
Get the Best Mortgage
If you find your dream home and then get your mortgage, you might lose out to somebody who already had financing in place. To avoid this, secure your mortgage pre-approval with a reputable company in order to present yourself as a legitimate, qualified buyer. Just like when buying a car or clothes, search for the best rates and pick the winner!
