So You Want to Buy your First Home. Do You Know……?

Your Credit Score: Before you get started, contact a mortgage lender and ask them to run your credit report so you know your credit score. They will also be able to tell you if there are any issues on your credit report. If there are, this will be the time to address them. But, do NOT run your credit report yourself through a free online credit report company. These credit reports are not the same ones as the mortgage lenders use and your scores will not be accurate.

Homebuyer

How Much You Have for a Downpayment & Closing Costs: The more money you put down on a house, the lower your mortgage payment will be. If you are able to put down at least 20%, you will avoid private mortgage insurance or PMI. You should also budget another 3-6% of the purchase price for closing costs. However, houses can be purchased now with as little as a 3.5% downpayment. You may also be able to finance the closing costs in the mortgage by obtaining a seller’s concession of 3-6% of the purchase price.

What Amount You Can Borrow on a Mortgage: You will need to compile copies of your income documents such as paystubs, W2 statements and federal tax returns so your mortgage lender can review them. Your mortgage lender can then let you know how much you can borrow to buy a house. Generally, you can spend from 33-45% of your gross monthly income on your mortgage payment. You can also spend 38-55% of your gross monthly income on the total debt payments which includes your mortgage payment and all other monthly debt payments (e.g. car, credit card, student loans).

Where You Want to Live: Use online tools to explore various towns you may want to consider. There is information about school ratings, commute times, amenities, etc. that can easily be found on various websites. Once you have decided on a few towns, visit the towns and drive around. You cannot get a feel for a place until you have seen it in person.

A Good Real Estate Agent: Once you have completed the above steps, you will want to speak with a real estate agent to assist you with the process. An agent will be able to help you decide which features you want and don’t want in a home and then match these with available properties. They will also have market expertise and local knowledge. Once you find a home, a real estate agent will help you negotiate the price and assist throughout the home-buying process. But, before hiring an agent, get referrals from people you trust as well as professionals in related fields. Then, read the agent profiles and reviews online to see the experiences others have had with that agent. You should also interview several agents on the phone or in-person before hiring one.

With the information above, you will be on your way to buying your dream home!

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