How To Prepare To Buy Your First Home
You’re ready to buy your first home, and you’ve saved up some money. But between the down payment, closing costs, and other expenses that come with buying a house, you might feel like it’s not even worth doing. And that’s where we come in! Because while buying a home can be overwhelming and scary, it can also be really exciting—and worth every penny once you get into your new place and start making it your own. So if you’re thinking about buying your first home (or helping someone else buy theirs), here are some things we recommend doing before signing on the dotted line:
Check your credit score.
Before you can buy a home, you need to know two numbers: your credit score and your credit report. Your credit score is a number between 300 and 850 that calculates how likely you are to pay back your debts. It’s also used to determine how much interest you will pay on any money borrowed. This can be important when buying a house because typically, the higher the interest rate, the larger the down payment required will be (and vice versa). That’s why it’s so important that you check both of these things beforehand—because if they aren’t where they should be for buying a house, it could mean trouble down the road!
Determine how much house you can buy.
To determine how much house you can afford, it’s important to first determine your monthly income and credit score.
Once you have that information, use it along with the following factors:
- your down payment (the amount of money put toward the purchase price)
- the interest rate on the loan that will be used to finance the purchase
Save money for the down payment.
You’re going to need a down payment. A big one, too. This is the amount of money you put towards the purchase of a home, and it’s typically a percentage of the purchase price. The bigger your down payment, the less money you have to borrow from lenders—and thus pay back with interest in future years—which can help keep your monthly payments low.
A good rule of thumb for how much to save for your down payment is 20% of what you can comfortably afford (without jeopardizing other financial goals). If that seems like an impossible sum for those living on an average salary with student loan debt hanging over their heads, don’t worry; there are plenty of options out there designed specifically for first-time homebuyers looking to get into their first place.
Find a real estate agent and mortgage broker.
Finding a real estate agent and mortgage broker can be one of the hardest parts of buying your first home, but it’s also an important step. Your real estate agent will help you find the best home for you and your family, while your mortgage broker will guide you through all of the paperwork required to secure a loan.
Get prequalified for loans.
When it comes to buying a home, there are plenty of questions you’ll want answers to—and fast. What is the closing timeline? How much can I afford? How long will it take from start to finish? These are all valid questions, but one stands above the rest: “What should I do before moving forward with this process?” The answer lies in getting prequalified for loans.
Prequalification is the first step that many buyers take when applying for financing on their new home. It’s something that can be done online, through your bank or through a mortgage broker (the person who helps you find and apply for mortgages). Your lender will run your credit score(s) and financial history and determine what sort of loan amount they think would work best based on those factors; if they determine that you could get approved for an amount similar to what you had initially expected (or higher), then great! You’re ready to purchase! If not, though…well…then maybe hold off until later down the road when things have changed around here somewhere else…
Buying your first home can be overwhelming but you can prepare for it.
The process of buying your first home can be overwhelming, but there are things you can do to prepare for it. It’s important to get prequalified for loans and find an agent before starting the home search. You can also get a copy of your credit report and check your credit score with Credit Sesame or WalletHub before you start looking at homes so that you know what lenders will see when they look at your credit history.
With all this information in hand, it’s time to start saving! You’ll need cash on hand for deposits, closing costs and down payments (which can vary between 3%–20%).
Hopefully, we’ve helped you get a better understanding of what it takes to buy your first home. While buying a home can be exciting and overwhelming at the same time, there are many steps that you can take to prepare yourself before making this big decision and becoming a homeowner. Give West Michigan Mortgage a call today to get started down the road to homeownership.