March 5, 2021 | 4 Minute read
Buying your first home is one of the most exhilarating times in your life — but it can also be one of the most stressful. However, by doing a little homework to find out the steps you’ll need to take, you can shop for your new home, apply for a mortgage loan, and close the deal with confidence.
Here are just a few steps to buying your first home you should keep in mind …
Before you even start looking at homes, you should determine how much house you can afford — and if it’s the right time to purchase. Typically, owning a home will pay off financially if you live in it for five years or longer. And while hopefully, your home will appreciate in value, you shouldn’t necessarily look at it as an investment.
You should purchase it because you want to buy a home, not because you’re looking for an investment or to make a quick profit in a few years’ time. In other words, only buy a house that you love and can afford today.
To make sure you can afford your home, try to keep your total housing payment to less than 30 percent of your gross monthly income. If you spend any more than that on your mortgage, you risk becoming “house poor” — in other words, you may live in a beautiful home, but you may also find it difficult to cover all of your expenses each month.
Is there anything worse than finding your dream home… only to discover that your finances aren’t up to par and you aren’t able to buy it? Hopefully, this comes as no surprise, but qualifying for and getting a mortgage requires a good credit score. One of the first things you’ll need to do is check your credit report for any errors and see if any adjustments need to be made before applying for your mortgage.
An easy and relatively fast way to improve your credit score is to pay down or pay off your credit card balances and stop using them for at least two months before applying for a mortgage loan. Also, make sure you aren’t applying for or opening any new lines of credit leading up to purchasing your home.
Next, you’ll want to consider the cash you have on hand that can help make buying your first home a reality. Part of this is your down payment, which is usually between 3.5 and 20 percent of the home’s purchase price. And as you save, make sure to not underestimate just how much you’ll need — many people are surprised at just how much cash is needed at closing, for instance.
All too often, home buyers wait too long to shop for a mortgage — and then watch their dream home go to another buyer who already has their finances in order. Getting pre-approved for a mortgage is a free and non-binding process that shows you are a serious and qualified buyer who’s ready to buy a home — a huge plus to any home seller.
Comparing mortgages can be confusing, but there are basically two types of mortgages: fixed-rate and adjustable-rate mortgages, which are priced differently. Most buyers go with a fixed-rate mortgage, with a 30-year fixed-rate mortgage being the most popular option, by far.
If you put down less than 20 percent on your home, your lender will also likely charge you a monthly premium for PMI, or private mortgage insurance. This insurance protects your lender in the event that you default on your loan.
Whether you’re just getting started or you’ve been searching for houses to buy for a while, Reali’s got your back. Reali agents are experienced local agents who work with your best interest in mind at every step of the transaction. All of our agents are experts in the areas they serve. They’ll support you through the entire process, from search to negotiations, throughout the paperwork process and close.