When it comes to buying a home for sale for the first time, buyers should take steps far in advance. It's tempting to just jump in, go to a few open house events, and make an offer. That, however, is not recommended. The more prep you do ahead of time, the smoother the home-buying process will be. Read on and find out the actions you should take in preparation for buying a home for the first time.
Do the Math – Taking the time to make a budget is the most important preliminary move you can make. You should begin to view your financial situation just like the lenders will when you apply for a mortgage. What you need is a housing budget. Subtract all of your non-housing expenses from your monthly income. That's things like credit card bills and auto loans. The amount left over is your housing budget. You should aim for a housing expense allotment that is about 28 percent of your monthly income. This percentage is not fixed, and you might be more comfortable going a bit higher or lower. The housing budget tells you how much you can spend on a house payment each month.
Save Save Save – Like the other real estate buzzwords "location, location, location," "saving" is just as important. In most cases, you will need some money for a down payment. The amount needed depends on the price of the home, but most conventional lenders like to see a down payment of about 20 percent or so. You will also need cash in the bank for closing costs. These costs can vary and you won't know an estimate until you make your purchase offer, but you can expect to pay several thousand dollars in closing costs.
Check Your Credit – Getting approved for a mortgage means having good credit, and lenders look at your credit score to ascertain the level of risk in lending to you. This three-digit score can affect the interest rate you pay, how big of a house you can afford, and whether or not you will be approved at all. The number you need depends on the type of loan, the cost of the home, and other factors. In most cases, you will need a score of about 600 for government-guaranteed loans like FHA and USDA and closer to 750 for a conventional loan, but these requirements vary. Scrutinize your credit report and report errors as quickly as possible.
Contact a Real Estate Agent – The one thing that first-time buyers fail to understand is the importance of using an agent early in the process. Speak with an agent to find out more about the market, hot neighborhoods, average home prices, and more.