Buying your first home can be both exciting and intimidating, here are some tips to help you achieve the American dream.
1. How to Get a Mortgage
Getting a mortgage is the most confusing process of buying your first home. Though this may sound counter-intuitive, you should know how much money you can borrow and what bank(s) you can borrow from, before starting your home search.
Enlisting the help of a mortgage broker can cut down on a lot of headaches for first-time home buyers, as they can help you sort through all the different mortgage types, different mortgage lenders, and can often find you a better deal. Friends and family may have area recommendations, or a quick search on Yelp will pull up local brokers and their reviews.
Get your finances in order, preferably three to four months before you start looking for a home to buy. Getting approved for a mortgage can be a grueling process, help yourself out by keeping good balances in your bank accounts, and paying down as much debt as possible.
Your broker or lender will pre-approved you for a mortgage. This will help you gauge your budget and also establish you as a “serious” buyer.
2. How Much Home You Want to Afford
Chances are, you will probably get pre-approved for a mortgage way out of your expected budget. It is not unheard of for a person with a yearly income of $60,000 and with minimal debt to be pre-approved for a $260,000 mortgage.
To help set your budget – tell your realtor how much you want your monthly mortgage payments to be, including taxes, insurance, mortgage insurance, and any HOAs or CDDs, and they can help calculate how much home you want to afford.
3. Your Goals for Your First Home
Do you want a starter home? Or a forever home? Some first-time home buyers want to stay in their first home forever, while some may only want to stay for five years then rent it out or sell it. You may not be able to predict the future, but having a general idea for how long you want to stay in your home, and this will help you evaluate homes that you tour.
Also, do you want a move-in ready home? Or a fixer-upper? Properties that require work, may come at a great value, and can earn you a great deal of equity, if you’re willing to put in the time and money to improve the property. While move-in ready homes build equity through paying down the principal mortgage amount and increasing prices in the local housing market.