Catherine Wilson's Blog
Are you thinking about buying your first home but completely overwhelmed with where to even begin?
Buying your first home is a big, and exciting, decision. It’s also one that comes with a big learning curve you need to get down quickly.
There are many steps to the process and even though your agent is always here to help you and give advice it’s critical you do your own research. You want to be able to take action quickly when you find your dream home. To do this you will need to be able to keep up with the process by having everything done neatly, orderly and on time.
So where to start?
Start by sitting down with your budget. What do your current finances look like? What sort of wiggle room for spending do you have? What can you afford for a monthly mortgage payment?
And perhaps more importantly, do you have enough saved to cover a down payment and closing costs? Depending on which programs you qualify for you don’t necessarily have to put the traditional 20% down. With that said, you should know how much you would need to put down and if you have money in the bank to cover those costs.
Smooth out any credit snags. Your credit score doesn’t need to be out of this world, but it should reflect that you are actively improving and financially responsible.
Find a mortgage professional you trust to help you make the right moves throughout the process. Again, you want to be able to take action quickly once you find a home you love. And you don’t want to miss out because your mortgage professional hasn’t prioritized you.
You will also want to have a preapproval prepared, with the help of your mortgage professional, when you are ready to start looking at houses. Having a pre-approval in hand shows your agent that you are serious about this process.
Calculate the costs. Yes, more math! You will want to take into consideration real estate taxes, HOA fees, home repairs and maintenance as you refine your budget to see which homes make the most sense for your lifestyle.
When looking at homes focus on the “bones” of the house. Look past paint, hideous wallpaper and yes even the granite countertops. Are there enough bedrooms? Bathrooms? A laundry room? Is there enough garage space and driveway? Do you like the floor plan? The neighborhood?
Know what’s important to you. In an ideal world, you will find a home that ticks off every item on your wishlist. And not to say that it’s entirely impossible, but know which items on your list are negotiable. Which are you willing to budge on and which are make or break?
Buying your first home is a big endeavor, both financially and personally. Homeownership means taking on new responsibilities and bills, but it also means true financial independence.
If you’re hoping to buy a home in the near future, you might be wondering what you should be doing now to put yourself in the best position when it comes time to buy a home. Well, you’re in luck. Today’s post is a simplified list of all of the things you can be doing today to start making your way toward your ultimate goal of homeownership.
1. Pay off small debts
The first thing you’ll want to do to start saving for a down payment is to make sure you’re not pouring money down the drain to credit card companies for interest rates. If you owe small amounts of money (or less than $1,000), now is the time to aggressively pay down those debts.
The goal here is to get your credit cards to a place where you pay off your balance in full each month, avoiding interest while still earning rewards and building credit.
2. Speaking of credit…
One of the most important aspects of buying a home is your credit score. Take the time to learn about the 5 main things that contribute to your credit score and then work on ways to improve your score in those areas.
3. Don’t open any new accounts if you can help it
Once you start getting closer to applying for a mortgage, you won’t want any new inquiries on your account that are temporarily lowering your score. If you need to open a new account to lift your score, then do so well in advance of applying for a mortgage.
4. Get serious about saving for a down payment
There are a few ways to proactively save for your down payment; none of them include setting money aside when you feel like it. Start by opening a dedicated account and direct-depositing a portion of your pay into that account each week.
If you have an emergency fund in place, you might be in a position to use a CD or certificate of deposit. These give the highest earnings from interest out of any form of savings. The catch? You can’t withdraw from the account until you reach your savings goal without a penalty. If you know you won’t need to dip into these funds before they’ve matured, a CD is an excellent way to save.
5. Find out how much house you can afford
Homes are expensive. but, if it’s your first home, you might need to borrow the maximum amount form the bank to find a house that you’ll love. To find out what is a reasonable amount to spend on a home, you’ll need to consider your monthly mortgage, bills, taxes, insurance, and any other expenses. Leave yourself room for savings, emergencies, and to live a little. You won’t be able to enjoy your home much if you have to spend your days struggling to afford it.
6. Career planning is vital
A good career is a balance between stability and upward mobility. Don’t be afraid to be on the lookout for new positions with higher pay and better opportunities, even if you’re happy with your current job.
If you’ve been in your position for a while, consider asking for a raise. Research salaries for other people in your position and go to your boss equipped with data to show that show you deserve a raise.
Buying a home is one of the more complicated purchases that you’ll make in your lifetime. It’s not something that you can just open your wallet, pull out a wad of cash and buy. There’s a warm-up period for a house hunt. You need to prepare before you even start the process of the purchase. There’s a lot of different things that you should do to ready yourself to buy a home. You’ll need to organize your finances, find a real estate agent and ready yourself. If you’re looking to buy a home in the near future, it’s time to get busy!
Keep Your Credit Score In Check
Your credit score is so important for so many reasons. The highest your credit score can be is 850 and the lowest it can be is 300. You’ll get a really good interest rate on a home if your credit score is 740 or above. A lower interest rate can save you a lot of money over a year’s time.
The good news is that you can spend time repairing your score. This will include paying down debt, asking for credit limits to be raised and correcting errors that may be on your credit report. You want to be sure that you’re using 30% or less of your total available credit. As always, if your bills are paid on time, it will help you to keep that score up. Also, stay away from opening new credit cards, as this can bring your score down due to frequent credit checks.
Put Gifts To Good Use
Whenever you get a financial gift, whether it be for a wedding, a Christmas bonus, or a birthday gift, make sure that you save it for your home purchase. You’ll need quite a bit of capital between closing costs, fees and down payments. You’ll be glad you saved the money once you start the home buying process. You’ll also want to make sure that you have and emergency fund built up. You don’t want to buy a home without some sort of a financial cushion behind you.
Research Real Estate Agents
Your real estate agent will be your right hand person when it is time to buying a home. You’ll want to know that your agent is knowledgable and can help you in this big decision. Your real estate agent is the person who will help you reach your goals, and you want to feel comfortable with them. Ask for recommendations and do your research.
Sellers love buyers who have been preapproved. This shows that they’re reliable and financially able to buy a home. A preapproval can be done a few months in advance of buying a home. It will take an in-depth look at your finances including:
- Proof of mortgage or rent payments over the last year
- W2 forms for the past 2 years
- Paycheck stubs for the past 2 months
- List of all debts including loans and court settlements
- List of all assets including car titles, investment accounts and any other real estate you may own.
Buying a home is a big deal but with the right preparation, you’ll be on the road to success and ready to secure a home purchase.
Why you need a timelineThere are innumerable benefits to having a timeline for buying a home. There's are several steps and a lot of information to remember during the buying process. Having a timeline will make sure you stay on top of those steps. Knowing that you're keeping up with your end of the deal will help you feel more relaxed and confident as you enter into this important step of your life. It will relieve anxieties that you are forgetting something or that you are overwhelmed and behind on the process.
Before you start...There are a number of helpful tools to making a timeline. If you're the type who is constantly on your laptop or smartphone, you can keep your timeline in a document or spreadsheet there and make sure it's synced up between your devices so you can refer to it when needed. If you're more of an App kind of person, there are several apps on the market for helping you keep on schedule. They'll give you updates periodically and remind you when an upcoming task is due. Do you still keep a hard copy planner and carry it in your bag wherever you go? If so, consider drawing up a physical timeline that you can refer to. Just make sure you write it in pencil because you will invariably need to update it now and then.
Dates for your timelineHere are some items you should strongly consider putting on your home buying timeline. Everyone's timeline is different because each person has their own requirements when it comes to how soon they want to move. Give yourself realistic dates and look ahead on the calendar to make sure your items don't conflict with holidays or upcoming vacations. TIMELINE ITEMS
- Consider more than finances. Before contacting realtors or even before browsing listings online think about your own goals. If you're moving with another person think about your futures and where your careers may take you. The first date on your timeline should be a long discussion about the future and what you would like it to look like.
- Crunch the numbers. Consider your savings, expenses, current income, and projected income. As a general rule, don't look into buying homes over 2-3 times your income.
- Research lenders. Odds are you'll have a mortgage for quite some time, therefore you'll want to make sure your relationship with your lender is ideal. Read reviews, speak with several lenders, and talk to your friends and family about their experiences.
- Research insurance. The sooner you know how much you'll be paying in insurance the better.
- Get pre-approved. Doing this early tells home sellers that you are a qualified buyer.
- House hunt. This is the fun part. Give yourself plenty of time to consider options.
- Make an offer. Consider the features of the home, the cost of he homes in the neighborhood, and the seller's disposition toward the home (whether they need to sell it quickly or are just testing the water).
- Double check your contracts. Re-read all of your paperwork and make copies/back it up.