Buying your first home is as exciting as it is overwhelming. Here’s what you need to know as a first-time homebuyer.
5 STEPS TO BUYING YOUR FIRST HOME
Buying your first home is a big deal. The process is fraught with exciting and daunting tasks that can be quite overwhelming if you don’t know what to expect.
Fortunately, having some up-front knowledge and making a few crucial preparations can make the process less stressful and a whole lot easier. Here are a few important tips for the first-time homebuyer.
STEP 1 – KNOW YOUR BUDGET
Knowing your budget before you begin your home search will help you identify the monthly payment you can afford. Know how much you (and any co-buyers) bring in each month, subtract your total monthly expenses, and assess your savings potential.
Most experts agree that you should spend no more than 30-percent of your monthly income on housing. Don’t forget that owning a home comes with additional costs to the mortgage such as utilities, homeowner’s insurance, property taxes, maintenance/repairs, and more.
STEP 2 – GET A DOWN PAYMENT TOGETHER
In most cases, a down payment is required to purchase a home. This up-front payment could be as much as 20 percent of the purchase price of the home. As a first-time homebuyer, however, you may qualify for a first-time homebuyer loan that requires a lower down payment or no down payment at all. Your lender will let you know what programs you may qualify for.
STEP 3 – GATHER THE NECESSARY PAPERWORK
When you apply for a mortgage, you’ll need to provide a plethora of paperwork to prove you can make your monthly payments. While each lender is different, some common documents they require are:
- Your most recent tax returns (2 years’ worth)
- Your most recent W-2s
- 30 days’ worth of paystubs
- Bank account statements (2 months’ worth)
- Any other asset or investment statements including 401ks, stocks, bonds, etc.
Put all these documents and any others the lender requires in a folder and have them handy to help expedite the loan process.
STEP 4 – GET PRE-APPROVED
Lenders will compete for your business and the internet is full of mortgage lenders who want to lend you money. Shop around to find the best rate possible.
Once you’ve decided on a lender, get pre-approved for a mortgage. This will give you an idea of how much house you can afford. Also, a pre-approval lets sellers know you’re serious about buying their home.
STEP 5 – START SHOPPING
Now that you’ve gathered your down payment, organized the proper paperwork, and gotten pre-approved for a mortgage, it’s time to begin shopping for your new home.
Again, the internet makes it very easy to find homes for sale, but it’s a good idea to enlist the help of a knowledgeable real estate agent to find your dream home.
An agent can help you identify the homes most suitable for you as well as to navigate the often-confusing waters of the homebuying process.
Buying your first home is exciting and overwhelming at the same time. By following the steps outlined above, however, the home buying process is likely to be a lot less stressful.