Fortunately, by following a few simple steps, you can take the mystery out of achieving this important milestone.
Know Your Financial Picture
Before you get into finding and financing your first home, you have to answer an important question: can I afford it? That means taking an honest look at your financial picture, from how much you have saved up to how much you earn and spend every month. It’s also vital to know how much debt you have, including loans and credit cards, since your monthly debt payments can be a major part of your budget. You’ll need documented proof of all these amounts when it comes time to apply anyway, so now is a good time to collect this information in one place.
How much house can you afford? The rough rule is that you shouldn’t spend more than 30 percent of your pre-tax income on housing. So if you make $80,000 a year, your upper limit for mortgage, taxes and insurance should be $2,000 a month. You can use that amount, along with the down payment you’ve saved up and the mortgage interest rate, to estimate your price range. We even have online calculators to save you the math!
Get Pre-Qualified or Pre-Approved
Now that your financial picture is clearer, you’re ready to speak with an experienced mortgage professional. If you’re still early in the process and weighing your options, pre-qualification looks at your basic financial information to give you an estimate of what you can afford. Think of it as a more professional version of the calculation you did at home.
If you’re ready to buy, however, you can’t beat pre-approval. Your loan officer will collect all your financial documents, do a credit check, and then give you an official letter stating the amount they’re willing to loan. That all-important letter lets sellers know they can trust your offer. In a competitive housing market, pre-approval puts you one step ahead of other buyers.
Investigate Your Financing Options
If you’re worried that you can’t afford a home based on your savings or credit score, don’t lose hope. The Federal Housing Authority offers several programs that let you buy with a smaller down payment. If you’re a military veteran or buying in a rural area, you might even be eligible for loans with no down payment at all. Your state or municipality may also offer grants or low-interest programs designed especially to help first-time home buyers. A good loan officer can take you through all the options available to you, and help you see what you qualify for.
Filter Your Features
It’s easy to feel overwhelmed when you start shopping for your first home. The more you can do to narrow down your options, the better you’ll feel. Ask yourself what features you’re looking for, and then eliminate homes that don’t match those features. What neighborhoods are you looking in? How many bedrooms? How many floors? Are you looking for a newer house or an older one? Do you need a garage? A fenced yard? With your checklist in mind, you’ll be able to jump when you see the house you want instead of wasting time seeing houses that aren’t right for you.
Find The Right Realtor
When you know what kind of home you want and how much you can afford, it’s time to find your real estate agent. For a first-time home buyer, the right agent can make all the difference. They help you through the process from start to finish, from finding the right home to securing the mortgage to signing all the legal paperwork. When you need to find professionals along the way — inspectors, surveyors, lawyers and more — your realtor has a network of people they trust to get the job done. To find the right agent for you, ask friends, neighbors, or even your mortgage professional. Chances are they’ve worked with someone they can recommend.
When you’re ready to buy a home, start with a mortgage professional who really cares. Get in touch with us today at BayCoast Mortgage Company, and we’ll partner with you to make sure your first home buying experience is smooth and rewarding.