As interest rates begin to tick slowly, you may be considering saving money to buy a home this year. Home buying is one of the biggest purchases a person will make. Preparing to buy a home doesn’t just involve deciding on a location or scrolling through images of homes online. You’ll need to dive deep into your finances and prioritize your home feature preferences to help your home buying process be manageable. Here are a few steps to help you get started.
Determine Your Budget for a Home
Figuring out what you can afford to spend on a monthly mortgage payment may seem like an obvious place to start, but it is an important one. Experts say that your total monthly home expenses should be at most one-third of your gross monthly income. Mortgages are different from making a monthly rental payment. When you’re a home owner, your mortgage payment is only part of your monthly expenses. You must take property taxes, home insurance and interest into account.
Check Your Credit Score
If you’re not an all-cash buyer, you’ll likely need to finance the purchase of your home. Checking your credit score is another important first step. Your credit score will help you determine the financing options available. Lenders use credit scores to determine if a borrower has a record of on-time payments and to gauge the likelihood of repaying the mortgage. Your credit score will also impact your mortgage terms. The higher the score, the more financing options and lower interest rates will be available.
Create Your “Must-Haves” Checklist
As a first-time home buyer, you must list your “must-haves” for your new home. Do you need flexible space for a play area or a minimum number of bathrooms? It would be best to have a general idea of the size, location and amenities you want in your home. Determine what features you will compromise on to ensure your home fits your budget.
Shop Around for a Mortgage
Lenders will have different mortgage rates, so doing your homework is important. Shop around to find the lowest rate or work with a mortgage lender to help you find all the loan options available. Several types of mortgages are available, including Federal Housing Administration (FHA), conventional, adjustable rate and
fixed-rate. You’ll need to learn more about them to determine which option works best.
Buying a home is a considerable investment in time and money. To help you find a new home or for more home buying advice, contact your local home builders association HERE.