Buying your first home can be overwhelming, to say the least. The first step in buying a new home is preparing. Preparation can help reduce the stress involved in the home-buying process. Our tips below will start with the steps that will help best lay the groundwork for one of life’s biggest purchases. We will then move on to other helpful tips for the homebuying process.
- Determine how much you can afford – This needs to happen before you start searching and fall in love with a home that’s out of your price range. When determining a monthly mortgage you can afford, take into consideration taxes, homeowners insurance, utilities, and other monthly expenses that come with owning a home. Guthrie Community Credit Union has a handy mortgage calculator that can help you determine what your monthly mortgage payment will be based on various factors, such as down payment and interest rate. It’s a good place to start when determining your budget.
- Save for a down payment – Once you’ve identified your price range for a new home, you’ll have a good idea of what you will need in the form of a down payment. You will want to aim to save at least 20% for a down payment. Once you have your down payment saved, continue saving for an emergency fund. As a homeowner, you will want to be well-prepared in the event of an unexpended home repair or other big expense.
- Pay down debt – Owning a home is a big expense and it means getting a mortgage. The less debt you have going into the process, the better your chances of scoring a low-rate mortgage loan. Lenders like to see a low debt to income ratio. Less debt may mean your monthly mortgage payments will fit better into your budget.
- Improve your credit rating – When buying a home and applying for a mortgage, your credit will be one of the main factors in determining whether you’re approved. It will also determine your interest rate and terms. While paying down debt as we mentioned above will help you to improve your credit rating, you must also focus on making all other monthly payments on time to build a good credit history. Here are tips for improving your credit score.
- Research your mortgage options – Talk to your neighborhood credit union and discuss your various mortgage options. In addition to conventional fixed and adjustable-rate mortgage loans (ARM), you may be eligible for a Federal Housing Administration (FHA) Mortgage or a Veterans Affairs (VA) Mortgage. Click to read about the different mortgage options at Guthrie Community Credit Union. Understand that if you choose an ARM, your monthly payment may change.
- Compare mortgage loans – Another important step in the home-buying process is shopping for a mortgage loan. This is a great way to help with determining your budget. Shop rates, compare terms, and also get details on any and all fees and closing costs involved in a mortgage loan. Closing costs typically range from 2% to 5% of the loan amount. Many home-buyers are caught by surprise. Comparing and researching now will help you be better prepared for closing costs when the time comes.
- Get preapproved for a mortgage – You can be pre-qualified or pre-approved for a mortgage as well. This will help when putting in an offer on a home. Preapproval shows a seller that you are a serious buyer with the means available to purchase a home. This is important in today’s competitive home buying market.
- Find an experienced realtor to help with your home search – A qualified realtor can mean all the difference in a smooth home-buying process, from searching and negotiating a deal through closing. This can really help take the pressure off you in the home buying process. They will be able to help you focus on homes in the neighborhoods in which you are looking in the price range you’ve determined. They can be your guide through the entire process.
- Once you’ve found the home you want, make an offer – Your agent will be a big help in providing comparable sales to help you determine your offer. Once you make the offer, there may be a counteroffer from the seller and some negotiating in coming up with an agreeable price. Again, your realtor will be a source of help during this process.
- Get a thorough home inspection – Your realtor may be able to provide recommendations for home inspectors. You can also ask friends for recommendations of inspectors they’ve used and were happy with. You will want a thorough assessment of the structure to find any potential problems. You may need other inspections as well, for things such as radon, mold, or pests. Your realtor can provide you with a list of what type of inspections you should have.
- Apply for your mortgage – By now you should be pre-approved, so officially applying for the mortgage should be a breeze. Be sure everything, such as the rate that was agreed upon at pre-approval is what you are being offered. You will also want to be sure that your financial situation has not changed throughout the process. Your income is still the same and you have not incurred additional debt.
- Close on your home – Your realtor will help with all of the paperwork and walk you through the closing process. Welcome to your new home!
For more information on mortgage loans or to discuss if you’re financially ready to purchase a home, visit Guthrie Community Credit Union. We’re your community credit union!