Everyone dreams of buying a home. While it can be a very exciting and fulfilling experience, it is also a huge financial step. And that’s why it can turn out to be daunting and stressful as well. Complex paperwork, credit scores, mortgages, and down payments can dampen anyone’s spirits. But you can’t let the process deter you from fulfilling the goal of home ownership. In fact, if you’re equipped with the right information, you can buy a house with relative ease and confidence. So if you’re ready to leave your rental days behind and purchase your own place, here’s how to start.
5 Basic Steps to Buying Your First Home
- Determine your affordability. This is the first thing you should do as soon as you decide to buy a home. Get a clear idea of how much you can afford to pay for a home. The general recommendation is to look for homes that don’t cost more than three to five times your annual income. Provided you make at least a 20% down payment. You can also make use of affordability calculators available online to determine the price range you should set for your house hunt.
- Research. Once you’ve determined how much you can pay for a new house, start looking up real estate listings. Check newspapers, magazines and websites, visit open houses, and talk to real estate agents. Shortlist properties that you are interested in looking at. Keep track of changes in prices if any. This will give you a fair idea of the housing trends in your area.
- Check your credit. While the next big step is to look for a loan, checking your credit is equally important. Your credit score plays a major role in determining the interest rate that you will be offered. Likewise, the higher your credit score, the easier it is for you to qualify. If your score is not good enough, it may be time to clean up your credit. Pay off debts or outstanding credit card balances, make payments on time and do everything you can to improve your credit score.
- Prepare for the mortgage process. You have to be financially ready to purchase your dream home. Once you have sorted out your credit score, start saving up for the down payment and other related expenses. Also, start getting your documents in order. The time taken for the approval of your mortgage application will largely depend on how soon you furnish the required documents. To avoid delay, keep paystubs, bank statements, employment/proof or income, and tax returns ready for verification.
- Start mortgage shopping. As soon as you’ve zeroed-in on the house you want to buy, get preapproved for a mortgage! The biggest mistake most people make when they need a loan is walking into a bank and applying for one. This way you’ll be forced to accept whatever rate is offered to you. On the other hand if you have a preapproved loan from multiple lenders, you get the power to choose one that offers the lowest rate and best suits your requirements.
A home is an expensive and long-term investment. It requires careful thinking, planning, and deliberation. So take advantage of online tools to compare house prices, lenders, and mortgage rates. Manage your finances well and maintain a credit score that won’t let your dream home slip out of your hands!