Prepping to Purchase Your First Home

Determine Your Budget

Knowing how much you can afford is fundamental when buying a home. Talk to a lender to get an estimate of how much you can borrow based on your income, debts, and down payment. Don't forget to factor in property taxes, homeowner's insurance, utilities, and maintenance expenses. In my area, special assessments can be part of the property taxes. Your area may have developments with flood insurance or homeowner's associations. If your current rental payment feels manageable, consider setting aside any extra funds you would require for your future mortgage payment into a savings account. This strategy can help you acclimate to the higher payment while building your financial reserves for homeownership.

Start Saving Early

Buying your first home is a significant milestone, and the earlier you start saving, the better. Begin by setting up a dedicated savings account specifically for your home purchase. Automate monthly deposits to ensure consistent savings. Not only will this help you gather the necessary funds for a down payment, but it can also cover additional costs like closing fees, moving expenses, and any initial home repairs or improvements. If your current rental payment feels manageable, consider setting aside any extra funds you would require for your future mortgage payment into a savings account. This strategy can help you acclimate to the higher payment while building your financial reserves for homeownership.

Improve Your Credit Scores

Your credit score plays a crucial role in determining the mortgage options available to you. The higher your credit scores, the better the loan terms you can secure. Start by obtaining a copy of your credit report directly from the credit bureaus or from a mortgage lender. Keep in mind that a lender will pull from all three credit bureaus, and use the middle score for qualifying. Take inventory and check for any reporting errors. Keep your credit card balances low and refrain from disputing, opening, or closing accounts unless instructed to do so by a professional. Making timely payments on all your bills can significantly improve your credit score over time. Your lender may have access to a credit simulator tool that can be used to show a hypothetical scenario for improving your score, so be sure to ask if that's a tool available to you!

Research Mortgage Options

Getting the best financing for your home involves understanding the different mortgage options available. Research the various types of loans, such as fixed-rate, adjustable-rate, FHA loans, USDA loans, and VA loans. Each type has its pros and cons, so it's essential to choose one that fits your financial situation and long-term goals. Consult with multiple local lenders to compare their offers and find the best rates and terms. Depending on where you live, there may be down payment assistance or discounts available to you. Be sure to ask your lender about local programs. Some programs I'm aware of in my area include discounts or assistance for single parents, elderly, disabled persons, first responders, teachers, hospital workers, and military.

Get Pre-Approved for a Mortgage

Getting pre-approved for a mortgage is a game-changer in your home-buying journey. It demonstrates to sellers that you're a serious buyer and provides you with a clear picture of how much you can afford. During the pre-approval process, lenders will evaluate your financial situation, including your income, credit score, and debt-to-income ratio. This step can give you a significant advantage in a competitive housing market. Most pre-approvals are good for 90 days, so you have time to complete your house hunt. Going with a local lender is almost always the best choice. A local lender will understand the nuances of financing a home in your area and will have connections with professionals, such as real estate agents and home inspectors, that understand your market.