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Buying a home for the first time can be exciting as well as a little intimidating.
There’s a lot at stake so for the best home buying experience, it’s wise to educate yourself in advance about the ins and outs of homeownership.
Before you find a realtor and start attending open houses, here are five steps that will prepare you for a smooth home buying process.
- Determine what you can afford.
You may feel the urge to stretch the budget a bit for that perfect dream house, but there can be painful consequences for buying a house you can’t really afford. While the largest expense you’ll likely have is your mortgage, there are other significant costs associated with owning a home. It’s important to weigh all of these financial factors. Home affordability calculators allow you to input your estimated expenses to determine how much house you can realistically afford to purchase. In addition to the monthly mortgage amount, be sure to include property taxes, homeowners’ insurance, private mortgage insurance (if applicable), and maintenance costs, as well.
- How’s your credit?
According to the U.S. Department of Housing and Urban Development (HUD), the average credit score of first-time homebuyers is 716. If you’re not sure what your current credit score is, there are numerous free online tools available, such as this one from NerdWallet. If you find out your score is below the average, there are several ways to improve your credit before you apply for a loan, including reducing your debt as much as possible, paying your bills on time, and using your credit card responsibly.
- Cut back on your expenses.
Depending on the type of mortgage you get, you’ll need to save between 3% and 20% for a down payment plus extra cash for closing costs. Closing costs depend on a variety of factors, but expect to pay quite a bit in upfront expenses. In order to save money for these and other homeownership expenses, you’ll probably need to spend less throughout the month. Cut back on dining out, get rid of your cable television for the time being, and shop around for the best car insurance and cellphone deals. Combined, these savings can add up quickly.
- Attend a seminar or take classes.
Purchasing a home is a complex, major life event, so getting all the knowledge you can is always a good idea. Lenders and agents often offer free seminars that explain the homebuying process in detail. Many local government and nonprofit agencies also offer classes that can help you prepare for this significant financial responsibility.
- Get pre-approved.
Once you’ve improved your credit score, calculated your housing budget, and socked away a good amount for home buying expenses, it’s time to get pre-approved for a mortgage. In this process, a lender checks your credit, verifies your income, and approves the rest of your documentation. The pre-approval amount typically lasts for 90 days. Now it’s time to go out and purchase your dream home!
Putting yourself in the best position to buy a home is a long-term project that could take months or years, depending on the condition of your credit and your savings. It takes time and effort to find a great, affordable home, but once you’re moved in, you’ll see that it was all worthwhile.
Certified Title is here to make your homeownership journey its most successful. We hope you find these resources helpful in navigating the homebuying process. If you have questions or need more information, please reach out to us anytime.
About Certified Title Corporation: Since 1994, attorney-owned Certified Title Corporation has been furnishing residential and commercial real estate stakeholders across the nation with robust title insurance, settlement, and escrow services. Renowned for industry-leading reliability and an exemplary level of service and quality, the Maryland-based company helps clients from all walks of life achieve their asset goals. To learn more, call (888)486-5511 or visit https://www.certifiedtitlecorp.com/.