If you are ready to transition from renting to home owning, there are plenty of tasks to complete to seal the deal and finally call yourself a homeowner. Buying a home is one of the biggest investments you will make, so you want to do everything you can to make sure the process runs smoothly.
Here are 7 must-do’s for the first time homebuyer:
Find Out How Much Homes are Selling For
Do a quick search online for homes in the area you are looking to purchase in to see how much homes are selling for. Once you locate a specific neighborhood or area, you can get an idea of how much you may be spending on a home. This number will help you determine how much a monthly mortgage payment will be. Of course, I’m also happy to provide you with this information.
Determine Other Costs
Next, include taxes and home insurance costs into the monthly payment. Call an insurance agent in the area you’d like to move to and get an estimate. This will give you a good idea of what you will pay. To estimate your taxes, take a look at your property appraiser’s website. The exemptions and intricacies of local tax law may create differences between current tax bills and what a new homeowner can anticipate paying.
You’ll also need to determine what the closing costs will be, including your lender’s origination fees, title and settlement fees, taxes and prepaid items like homeowner’s insurance or homeowners association (HOA) fees.
Take a Look at Your Budget
It is recommended that you spend no more than 28 percent of your gross monthly income on your home. If the payment on the home you are looking to buy is more than 30 percent of your income, you may want to reconsider. If you can put a higher down payment down, you can help reduce the monthly payments.
Evaluate Your Credit
Poor credit or the inability to make a decent down payment can really put a damper on your homeownership plans. Before you start the home buying process, you need to get a good grip on what your credit scores are from all three major credit bureaus and why your credit scores are what they are. If you find errors on your report, be sure to contact the credit-reporting bureau to get them corrected.
Gather the Appropriate Documents
Gather your bank statements, W-2s, tax returns, and pay stubs from the last two years along with statements from current loans and credit lines and the names and addresses of your landlords for the past two years. Having this paperwork handy and organized will save your lender a lot of time.
Obtain Mortgage Pre-Approval
Gaining pre-approval for a mortgage will help you negotiate when you are house hunting. Your bank and local credit union are great places to start your search. If you apply with multiple lenders in the same month, you will increase your chances of getting approved for a loan at the best rate possible without hitting your credit score too hard.
Find an Agent
Of course, the most important thing you can do as a first-time homebuyer is to partner with a local real estate agent who can not only walk you through the process —but who can also connect you with mortgage lenders, inspectors, appraisers and other professionals you’ll need throughout the process.
If you’re thinking about buying a home for the first time, give me a call. I’m always available to help and look forward to helping you find your dream home.