Buying a home is one of the biggest decisions and investments you’ll make in your lifetime. While exciting, buying a home can also be very intimidating. From choosing your ideal location to making an offer to the sellers, there are steps you can take to make you’re prepared.
Determine Your Budget
Before you start looking for your dream home, it’s highly recommended that map out and calculate exactly what you can afford. Remember to include factors such as homeowner’s insurance and all your utilities. You may also be required to pay HOA fees which vary depending on where you choose to live.
Start Saving Early
Once you determine your price range, it’s time to start saving for a down payment. It’s common to put 20% down, but many lenders allow as little as 3% down. Keep in mind, if you put less than 20%, you may be required to pay mortgage insurance on top of everything else. If you’re struggling to come up with enough money for your down payment, look for first-time buy programs that offer extra assistance.
Check Your Credit
One of the key factors to being approved for a mortgage is your credit score. There are many sites that allow you to check your score to give you a good idea of where you stand. If you have less than stellar credit, pay off any outstanding debts and consider using and paying off credit cards on a regular basis to improve that score. Unless absolutely necessary, avoid opening any new lines of credit at this time as they have the potential to drop your score temporarily.
Do Your Mortgage Homework
There are several options when it comes to choosing a mortgage. From the standard 30-year fixed rates to potentially riskier adjustable rates, you should check with your lender to explore your options and ensure you’re making a wise investment. Once you determine which mortgage rate is right for you, get quotes from at least 3 lenders to compare costs and fees.
Don’t Forget the Closing Costs
In addition to saving for a down payment, you’ll need to have enough in the budget for your closing costs. These typically range from 2-5% of your loan amount. You can frequently negotiate with the seller for some assistance in this department, but you should set aside enough to afford these fees.
Buying your first home can be overwhelming, but when you’ve done your homework, you’ll be packing those boxes and moving in no time. Next up, decorating your new space!