Be Savvy When Purchasing Your First Home
Making the decision to purchase your first home is, at once, exciting and daunting. To help you through the process, the below steps provide a guide to first-time buyer success by providing a useful framework for where to begin, as well as an ideal path to follow in the search for your dream home.
1. Calculate your monthly budget – before you look at homes.
It’s easy to jump the gun on this one, letting your excitement outweigh your financial means. Many first-time buyers make the mistake of falling in love with a home before determining whether they can truly afford it. Protect yourself from this common mistake by determining your monthly budget up front, including costs for the mortgage payment, taxes and insurance.
2. Determine your down payment plans.
Based on the type of loan you choose, you will need at least 3.5 percent as a down payment. This amount works if you get approved for an FHA loan, but you may need 5 percent to meet the terms of a conventional loan. Think about how much you have in savings, whether you can borrow from family, or whether you need to examine down payment assistance programs.
3. Meet with several mortgage lenders.
You’ll want to interview several mortgage lenders, whether they’re bankers you’ve worked with before, referrals from a family friend or a stranger you found on the internet. It’s best to meet with at least three before choosing, so you can gather information about their knowledge, services and personal style.
4. Get preapproved.
This step will take place through your chosen lender, and it’s different than prequalification. Preapproval is a more in-depth financial approval process, and it is taken more seriously by buyers once you make an offer on a home. Preapproval can give you a leg up if you find yourself competing with other buyers for your dream property.
5. Hire a professional realtor.
As in your search for a mortgage lender, you’ll want to meet with several licensed realtors before deciding which one is right for you. Attending open houses in your desired neighborhoods is a great way to experience a realtor’s style and offerings, and it can introduce you to those who know your preferred areas the best.
6. Know your needs.
Make a list of your top five must-haves in a home, and share it with your chosen realtor. Ask to be shown only homes that check all of your “essential five” boxes so you won’t waste time on properties that simply don’t fit your lifestyle or budget.
By using the above guide, you can lay the groundwork for a successful home search.
Image via Flickr/aliceheiman