A typical new year's goal is buying a home. For first time home buyers, the first steps to consider can be overwhelming. But, if you follow these tips, you will not only be prepared to start house hunting but you will enjoy the home buying journey.
First, evaluate your credit. Did you know that you can take advantage of free opportunities to evaluate your credit report? By federal law, you can request a free credit report every year from each of the 3 credit bureaus---Experian, Equifax, and Transunion. Request copies at https://www.annualcreditreport.com/index.action. Sometimes there is different information on each report. I would suggest requesting a report from each bureau initially to avoid any surprises later when you apply for a mortgage and the lender pulls your credit report.
If you find incorrect or questionable information, contact the creditor listed on the report for more information and/or dispute with the credit bureaus. It can take several weeks to resolve outdated or incorrect information, so expect that your credit report and score won't reflect any corrections immediately.
Second, save for a down payment. Many people think that you need a 20% or more down payment, and while that is ideal, that is not practical if you are a first time home buyer. For some loans, you only need 3% down.
The higher down payment you are able to save for, the lower your payment will be but when you are getting started, you have to consider that in addition to a down payment, you will also need to have extra money available for closing costs that can range between 2-5% of the purchase price. For a $300,000 home, you will need $9,000 for a 3% down payment and an additional $6,000-$15,000 for closing costs. Create a plan for setting aside a specific amount from each paycheck that will serve as your down payment and closing costs. Consult with a real estate agent and lender for resources that might be available, such as down payment assistance.
Third, get pre-approved for a mortgage. Your real estate agent can provide you with trusted local lenders that you should "shop" within a short period of time to evaluate your mortgage options. Lenders are great resources for additional guidance on preparing for a future home purchase. They will provide you with good estimates of your monthly mortgage payment and closing costs based on loan amounts.
Fourth, create your home priority list. Keep in mind that there isn't any perfect home at any price, so create a list that outlines both wants and needs. The goal is to find a home that meets your needs and most of your wants. This home priority list will minimize wasting your time looking at the wrong properties. Sharing your list with your real estate agent will also ensure that your agent focuses their time and attention to your priorities.
In addition to the tips above, a buyer consultation is a great way to ask any questions upfront. Ready to get started? Contact me today.