After years of renting, you’ve decided that it’s time to take the plunge and buy your first home. There are plenty of things to know before you dive into the home buying process. Follow these first time homebuyer tips so that you not only get what you want from a home, but also from your home loan.
Getting prequalified lets you know the general size of the loan you’ll be able to receive. It gives a lender an idea of whether you’ll qualify for a mortgage, and it gives your buyer’s agent some peace of mind that you’re a qualified buyer. Get prequalified before you start looking at homes or weighing your options.
One important thing to remember is that the prequalification isn’t a guarantee that you’ll get a mortgage, nor is it a commitment to work with a specific lender. It’s much less formal than a preapproval, which requires the lender to run your credit and confirm your financial situation.
Make a budget
Once you’re prequalified, it’s time to figure out how much house you can afford. Take a look at your income and your total existing debt. Your total debt-to-income ratio should be less than 43 percent, according to the Consumer Financial Protection Bureau. Knowing how much debt you currently have compared to your income will let you see how much you can afford to spend on housing, which includes the mortgage payment, insurance and property taxes. For example, if your income each month is $4,000, you should keep your total debt below $1,720.
Make a list of what you want in a home
Before you start looking at houses, make a list of what you most want your new house to have. Think of the number of bedrooms you’d like, the size of the yard and the location. Is your heart set on one county or suburb, or are you open to looking at homes in a number of locations? Divide your list into “must haves” and “bonus features.” For example, you might need at least two bedrooms, but having an extra room for an office can be a bonus. Talk to an agent to find out what you can realistically expect to see in homes in your price range.
Remember the down payment
Buying a home and taking out a mortgage typically involve making a down payment. While some lenders expect 20 percent down, the first time homebuyer program from BrightPath allows you to purchase your home with much less down: often between 3.5 and 5 percent. Talk with a lender to determine if this type of mortgage is a good fit for you.
When you start the house and mortgage search, remembering these first time homebuyer tips will ease you through the process and help you get into your dream home as soon as possible.
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