An in-depth roadmap for the first-time homebuyer
You’ve worked long and hard for this but you’re officially on your way to buying your very first home. Congrats! Buying your first home is a huge achievement and it’s also one of the largest investments you’re ever going to make (as you’re probably well aware!). Besides from the huge chunk of change, buying a house for the first time can be a logistical challenge. You’ve gotta deal with things like mortgages, credit, loans, all while doing some serious financial soul searching. But here’s the good news: we’ve done the heavy lifting for you, and broken down the first time home-buyer guide into 11 easy steps. Buckle up: Here’s how to buy your first home. Organizing Your Finances How Much You Can Afford Pre-qualification Finding a Home Loan Pre-Approval Making an Offer Home Inspection Shopping for a Mortgage Homeowners & Title Insurance Closing on Your New Home Next Steps
Give your finances a facelift Student loans, past-due credit cards… been there, done that. This is the new financial reality for many of us thinking about buying their first home. And we’re the first to admit, it’s not pretty. But it can be managed! Homeownership is attainable with some focused saving, careful spending, and conscientious credit decisions. Fix your credit First thing’s first. Get a copy of your credit report, and start working on your score. One of the major steps to buying your first home is usually taking out a mortgage, aka loan, from a bank. To get this money, you’ll have to prove to the bank you’re a good investment and will pay them back on time each month. If you’ve had some hiccups over the years, not to worry. Credit can be built back up. All you need is a little time. Start thinking about a focused strategy leading up to that first visit to the bank. P.S. Even if you have good credit, it’s a good idea to think twice about big-ticket purchases, or biggish loans in the year leading up to buying your first home. Start saving for a down payment While banks will help you out with the majority of the payment when buying your first place, you still have to put down cash upfront, aka a down payment. Most mortgage brokers will ask for around 20%. That means for a $300,000 mortgage, you’ll be looking at a down payment of $60,000. If that seems like too much, you might want to look into securing a Federal Housing Administration loan from the government, which will allow you a down payment for as little as 3.5%, (using our example above, about $10,500). In addition to your down payment, most finance experts suggest putting money into a ‘rainy day account’ with at least six months of living expenses (e.g. food, insurance, car maintenance, loans, utilities, etc.). You should also consider all the fees and extras that come along with buying a home, as well as the process leading up to your big purchase. We’re talking things like realtor fees, property taxes, home insurance policies, loan-application fees, appraisal fees, home inspection fees, moving expenses, immediate repairs, and doc preparation fees. So many fees!