Save your cash. You’re going to need it for your down payment and closing costs. Save at least 3% of the purchase price to put toward closing costs, even if you’re asking the sellers to chip in. The lower the price of the home, the higher the percentage you should save. For your down payment, you’ll need at least 3.5% for an FHA loan, and for a conventional loan, you’ll want at least 10% down. If you can put 20% or more down, that’s even better and will go a long way toward getting you the best rates and terms from your lender. To help you save, consider setting up a separate “home” savings account into which you make regular deposits with each paycheck and from which you make no withdraws. Ever.
Do your research. Part of preparing to buy a home is research, research, research. By the time you’re ready to get in the car and start looking at homes, you should have logged hours of internet research. From financing to home prices and from neighborhoods to local real estate agents, you’ll need to learn about all of it. By being informed, the process will be more manageable and won’t seem so intimidating.
Check your credit. Go to AnnualCreditReport.com to get your free credit report from all three credit bureaus. You can’t get a free score from the site, but you can at least check the information that’s in their files and ensure it’s correct. If there are errors, get them fixed BEFORE you apply for a mortgage as it can sometimes take a while to get things straightened out. Also, now is NOT the time to open new accounts, close old ones, or to make any large purchases (cars, boats, furniture, etc).
Check your budget. Now IS the time to crunch numbers and see where you stand financially. It’s important to know how much money you have coming in and going out each month. This will help you set a target for your mortgage payment so you don’t overextend yourself financially.
Talk to a Realtor and a lender. If you don’t know any real estate agents, you can start by asking friends, relatives, and colleagues for recommendations. You can also search online. A couple of sites provide reviews of agents in your area. Start by looking at Zillow and Yelp. Trulia is also helpful. Talk to several agents and set up a meeting. You want to be compatible with the agent you choose. After all, you’ll be spending a lot of time together while you’re looking for a home. To get a feel for how we can help you buy your new home, come to our first-time home buyer’s class, being held Tuesday, January 29th at 7pm. We’ll walk you through the home-buying process and give you an overview of current market conditions. This no-obligation class is FREE, and you can register here.
Once you choose an agent, they can provide recommendations for a lender. Talk to several lenders and shop for the best rates and loan terms.
Preparing to buy a home is a lot of work. Contact us to help you get started!