Are you thinking of buying your first home? While it’s exciting to shop around for a place to call your own, buying a house can also be an intimidating process! Before making the biggest investment of your life, learn more about how to prepare to buy your first home, compliments of WorkWell.
Step 1: Get your finances in check! Remember lenders are reviewing your income, debt, and credit utilization. Avoid red flags on your credit report by keeping your debt to income ratio low and your available credit high. Also avoid any new credit applications at least for 6-12 months prior to applying for a home loan.
Step 2: Start saving money! Good homeowner prospects practice saving 10-20% of every paycheck. Not only will this healthy living habit help you save for a larger down payment, but could cover other expenses such as appraisal costs, home inspections, and closing costs which today can be between 2-7% of the cost of the house. Plus, it’s good practice to continue after purchasing your home in order to stay on top of home maintenance and unexpected home repairs.
Step 3: Find a good realtor! Go ahead and ask friends and family for realtor recommendations. This person is going to be vital to making the home buying process a breeze so don’t be ashamed of interviewing a few until you find the one to make your home buying dreams come true. Definitely avoid saying yes to the first realtor you meet!
Step 4: Get Pre-Approved for a Mortgage! We won’t lie to you; getting a home mortgage is challenging especially for first-time home buyers! Getting preapproved for a home loan gives you perspective on how much home you can afford and helps narrows down your search. Things you will need to get this process going are:
- Pay stubs
- Last two years tax returns
- Last two years W-2’s
- Most recent bank statements
- Credit report
- Statement of all savings accounts/investments