When you make the decision to purchase your first home, it can be a thrilling time – filled with excitement, but also uncertainties.
Do you contact a realtor first or a lender? How do you set your price range? How can you choose a home that will meet your needs now and in the future?
If you’re a potential home buyer unsure about the home buying process, HUECU’s FREE Home Buying Workshops may be just what you’re looking for.
In the meantime, check-out these 6 Steps to Buying Your First Home. In Part 1, we cover the three initial steps that every first time home buyer should consider for a financially healthy and happy home buying journey:
Step #1: Get Acquainted With Your Credit
Before you fall in love with your dream home, review your finances. In particular, make sure you know your credit score and understand what it means. Your credit score is one number that paints an overall picture of your financial fitness – and having a healthy score is essential to getting a good interest rate on your home loan.
If you’re not happy with your credit score, consider pausing the home-buying journey while you improve your credit health. Paying bills and credit card balances on time, as well as paying off as much of your debt as possible, can all help to raise your credit score and financially prepare you to restart the exciting process of buying a home.
Step #2: Organize Your Documents
At this point in the home buying process, it’s time to gather all the documents you’ll eventually need in order to apply for a mortgage. If you can’t prove certain information, such as your salary, assets and other financial information, you could be denied a mortgage.
To avoid any delays in your first home loan application process, start collecting the necessary documents as soon as possible. These include government identification, such as a driver’s license or passport, plus your social security number; proof of income over the past two years, in the form of W2 forms or paystubs, along with tax returns; and a credit report disclosure form, giving the lender access to your credit score, which should now be in good shape after Step #1.
Step #3: Talk to a Lender
That’s right – even before you meet with a real estate agent, you need to know how much money you can afford to spend on a new home. A lender or mortgage broker can assess how big a loan you’ll be able to take out, based on your credit score as well as your savings and other financial assets. You might also quality for local programs that offer assistance to first time home buyers.
Once you’ve found a lender you trust, it’s time to get a mortgage pre-approval. Getting pre-approved is more complex than simply getting pre-qualified, but it’s also essential to setting an accurate budget so that you don’t waste time looking at property you can’t afford. Once your pre-approval has been processed, you’ll know your budget and be ready to start shopping for your first home.
What more do you need to know about buying your first home? Check out 6 Steps to Buying Your First Home – Part 2 for the three final steps; including what to look for in your first home, how to make an offer, and one last must-do before you sign the check.