Have you been thinking about buying your first home? Maybe you have finally saved up a down payment and you are ready to move forward. Or maybe you have realized just how much of your hard earned cash you are throwing away on rent and are ready to move forward. Either way, this First Time Home Buying 101 Guide has everything you need to know to buy your first home!
Start Saving for a Down Payment
Having a down payment will lower the costs of your monthly mortgage and most of the time you will need a down payment for your offer to be accepted. Most often you will need a minimum of 5% of the total price of a home to qualify for a mortgage. However, 10% or 20% is even better. If you are considering buying your first home, be sure to start saving money for it now!
Improve Your Credit Score
When you want to buy your first home it is critical that you improve your credit score as much as possible! Cleaning up and improving your credit score will increase your chances of getting approved and lock in the best interest rates possible!
Steps to Improve Your Credit Score
- Check your credit reports–This gives you a chance to see if there is anything hurting your credit. Check all three credit bureaus: Equifax, Experian, and TransUnion. While they are similar they might have slightly different information that you want to be aware of before applying for a mortgage. You can get a free credit report here!
- Dispute Inaccurate Information--Get rid of any inaccurate information by disputing it with the credit bureau.
- Pay Off Delinquent Accounts–Delinquent accounts include, late accounts, charge-offs, bills that are in collection, and judgement. Pay off any and all accounts that are currently delinquent BEFORE applying for a mortgage.
- Make Payments on time–You should always be establishing a pattern of timely payments before you try to get approved for a mortgage. If you haven’t been doing that, START NOW! But wait at least 6 months before applying for a mortgage if you have had delinquent accounts or late payments.
- Reduce your Debt-to-Income Ratio— Your monthly debt payment should be no higher than 12% of you total income. But the lower, the better.
- Check your FICO score–Your FICO score should be at least 720 to get a decent interest rate on a mortgage.
- Don’t take on any new debt–when buying a home you are taking on a HUGE amount of debt. BE sure that you stay below 12% of your income and do your best to not incur any additional debt.
“After you qualify, you will need documentation to verify the information you provided and to move along with the loan approval process.“
Pre-qualification
Time to find out how much money you qualify. This is called pre-qualification and it is the first step in the loan process. You will talk with a loan officer and answer certain questions such as marital status, income, debt, credit score etc. They will determine how much money you qualify.
After you qualify, you will need documentation to verify the information you provided and to move along with the loan approval process. Documents you might need include:
- Tax returns
- W2/s
- Work history
- Bank statements
- Current rental information
- Divorce decree
- Bankruptcy documents
Decide on what you want in a home
Make a quick list of the things you want/need in your first home. This list can include
- # of bedrooms
- # of bathrooms
- stairs/no stairs
- School district
- Yard size
- Kitchen layout
- Etc
Rank your needs/wants in order of importance. This will help you during the home buying process later!
Home Shopping
For some people this is the best part! Armed with your pre-approval amount and your lists of wants/needs it is time to go home shopping!
Your agent can take you around to available properties, and/or you can look at homes online using the Multiple Listing Service (MLS) database that your agent can send you. Contact me if you are still looking for an agent! You can also look on sites like Zillow, Realtor.com, or Trulia. Your agent might even have the scoop on some listings that haven’t gone on “the market” yet which can give you an edge in the buying process.
Make an Offer
When you have found what you think might be the home of your dreams it is time to make an offer! Your agent will help you put together an offer letter. If the offer is accepted by the seller then it’s time to move to escrow!
Don’t Forget!
Your agent should be there helping you every single step of the way! As your realtor, I will help you with the home buying processes with everything from the home search, paperwork, escrow and up until the moment you have keys in hand! Contact me today so we can get started!