As a first-time buyer, the home buying process can seem intimidating. Between pre-qualifying and setting a realistic budget, there are a lot of decisions to make. To help make everything a little easier, we’ve rounded up three helpful tips for buying a home.
From repairing your credit to knowing how much you can afford, this list has everything you need to know as a first time home buyer. Here’s your go-to guide on how to buy a home.
1. Set Your Budget and Save
If you’re considering buying a house, the first steps in the home buying process should always be assessing your finances and the market. The home buyer demand in your area will tell you a lot about how affordable or expensive the location is.
You’ll want to take a look at everything you have coming in and coming out money-wise. Make a list of all of your fixed expenses. This will include things like student loans and car payments.
You’ll also need to look at what you can afford to put down. If you’re able to put at least 20% down, you can avoid paying private mortgage insurance or PMI. Once you know where you stand, you can make a plan to save more towards your down payment.
As a general rule of thumb, your housing payment should never be more than 30% of your income. This will leave plenty of room for additional savings, living expenses, and entertainment.
2. Work on Your Credit
Your credit is another big factor in your ability to buy a home. The higher your score, the better the loan terms you’ll receive. This means a lower interest rate and less money out of pocket each month.
If you have less than perfect credit, make some moves to repair it before you apply for a mortgage. Start by paying off your high-interest debt first. This will usually be credit cards. Make all of your payments on time and dispute any discrepancies you see.
The longer you are debt-free, the higher your score will go. You want your credit to be in the best shape possible when you go to apply. You can download a free copy of your credit each year from the Federal Trade Commission.
3. Get Pre-Qualified for Buying a Home
The next thing you’ll need to do is to get pre-qualified. A pre-qualification will include a credit check and verification of your income and your assets.
Even though you’ve set an ideal budget for a home, your pre-qualification will give you an idea of how much mortgage you can afford. Your lender will also tell you what interest rate you qualify for. They will also give you an estimate of your monthly payments.
Your pre-qualification can help you on your house hunt. If you’ve qualified for a $300,000 mortgage, you’ll probably only want to look at houses below that price point. When you make an offer, the sellers will also like to see your pre-qualification to know that you are a serious buyer.
Managing the Home Buying Process Like a Pro
With a little homework, you’ll be conquering the home buying process in no time. From getting pre-qualified to saving for a down payment, there are a few quick things you can do to make buying a home easier.
For more real estate and finance tips, check out the blog section for great resources and guides.