What you need to do before looking for your new home
Preparing to Buy Your First Home
by John Keller
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Although buying your first home can be incredibly exciting, the experience can also be overwhelming. This is one of the reasons that so many Americans are postponing their first home purchase, making 2011 the first year that more than 14 percent of the population below the age of 34 lived at home with their parents. There are so many small details that can have a huge impact on your financial future, so it is important to have the right advice from the time you first start looking at homes to the final moment when you sign a contract for purchase. Read on for helpful tips about preparing to buy your first home.
1. Explore Your Financial Situation
The first step for any first time homebuyer is to track finances for several months in order to get a clear picture of their situation. Track income and expenses in order to determine how much you can afford each month in home payments. Keep in mind that finding a maximum budget does not mean you need to spend every spare penny. Many people will be more comfortable with a home payment slightly below their maximum allotted amount. Although each buyer is different, certified public accountant Doug Beecher recommends, "A good place to start is to multiply your gross income by 25 percent." This amount should be your starting point for home payments each month.
2. Obtain Your Credit Report
Potential homebuyers should look up their credit reports and find out their FICO score. This number will be on a scale between 350 and 800. A lower number, or one below 500, may make financing nearly impossible. The higher your number, the lower your interest rates will be and the more trustworthy you have been deemed, financially.
3. Decide What You Want in Your First Home
Before you begin looking at homes, you will need to spend time writing down exactly what you expect out of your first house. Decide what the nonnegotiable factors are and what are merely wants instead of needs. For example, you may absolutely need a home with a backyard and two bedrooms, but you also want a covered garage and an open plan kitchen if possible.
Calculator: How Much House Can I Afford?
4. Find the Right Help
Purchasing a new home is rarely an individual process. The average person will need financing from a bank or credit union, and a realtor will help connect you to the right homes in your budget. Finding the right help is incredibly important, so make sure that the people you work with are considerate, able to answer your questions, and return your calls quickly.
While buying your first home is not always a quick process, it can be made much easier if you have the right information and the right help. Be sure to spend plenty of time investigating all your options before making a final decision. Many homeowners say that they actually find a home they prefer more than their own within six months of purchase, so try not to rush the process. By comparing and shopping around, you can rest assured in the knowledge that your home is perfect for you.
John Keller is a realtor who loves to write. He recommends getting a mortgage primer before shopping for a new home.
Take the Next Step:
- See how one couple saved $34k in interest on their mortgage before even closing.
- Make sure you're not overpaying on your mortgage. If you haven't looked for a lower mortgage rate in the past year, use our simple tool that compares different lenders to see what your monthly mortgage payment could be. It's private, only takes a minute and could show you how to save thousands!
- For more on buying and selling homes, please visit the TDS library section.
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