The First Steps: Preparing to purchase your first home.
May 18, 2020
Intimidated by the idea of purchasing your first home? Many first-time buyers are, but here are some ways to be prepared:
Managing your credit score
Monitoring your credit is easier than ever these days. Sites like Credit Karma allow you to check your credit and provide insight on factors having the highest impact on your score. Making consistent, on-time payments is necessary to maintain a good score. Keeping your credit card balances within a third of your limit is important as well.
Creating variety in the lines of credit you have open (e.g. car loans, personal loans, credit cards) can help boost your overall score. Don’t make the mistake of closing out older credit accounts that you don’t use. For example, if you have multiple credit cards but only use one consistently, try to use the others while maintaining a low balance and pay them off monthly. Average age of your accounts affects your credit score, so closing those could hurt your score.
*Once you have begun the mortgage process, do not apply for any new lines of credit or make major purchases-this could affect your loan eligibility.
Determine your budget
Viewing properties is the exciting part of buying a home! But before heading out, make sure to be realistic about your budget-what can you afford? If you are purchasing a home with a co-borrower or partner, make sure you both agree on what price point you feel comfortable with. Down payment often determines affordability, as it can impact your monthly mortgage payments. However, knowing your loan options could potentially get you into a bigger or more expensive home, so it’s important to be aware of what could be available you.
Understanding what you are comfortable spending and may be eligible for will help you define your home search. Being pre-approved before you start looking gives you real buying power when you find a home you want to make an offer on. A pre-approval letter sets you apart as a serious buyer, and could help you beat out other offers.
Do your research
Get as much information as you can about the locations you are searching in. Some things to consider are access to amenities, school system ratings and proximity to your workplace. Home listing sites like Trulia even provide neighborhood community insight and crime reports for that location and surrounding area. Most towns have websites that are a great resource for news on local businesses, events and parks & facilities.
Find a good realtor
Inquire with trusted friends and family who had a positive experience purchasing their home. They will more than likely have a referral for you; and working with a realtor you trust is important. Zillow, Google and Facebook are great sources for realtor reviews to help find the best fit for you. Your realtor will be advocating for you when it comes to negotiating the home sale, and knowing you are in capable hands provides peace of mind. Make sure you communicate with your realtor what things you are looking for in a home. Making up a list of “needs” and “wants” can help him/her narrow down potential properties for you.
Don’t deplete your savings
Make sure your home budgeting includes leaving a cushion in your savings account. Expenses stretch beyond closing costs and you will most likely need to put some initial cash into your home for things such as painting, small repairs, etc. Buying a home can come with unexpected expenses as well, so it’s best to be prepared.
Buying a home is an exciting step, and it’s easy to get overwhelmed. But taking these steps will get you well on your way to buying your first home and give you an advantage in the competitive market.
Categories: First-time homebuyers
Tags: FHA Loan