Purchasing your first home is very exciting, but there is also some planning that should be done to make sure the process goes smoothly. Check out the timeline below for tips!
3 Years Prior: Start saving.
When purchasing a home a down payment needs to be made. FHA loans require a down payment of at least 3.5% of the final purchase price, whereas conventional loans require a down payment of 5% or more. Let’s give that some perspective. If a home is priced at $250,000, the down payment for an FHA and conventional loan would be $8,750 and $12,500 respectively.
2 Years Prior: Check your credit score.
Credit scores play a vital role when determining loan amounts. A great credit score will get you a larger loan, lower interest rate or both. Remember, when you’re buying a home with another person, both scores are taken into consideration. Therefore, it is important to check credit scores well before buying a home, so if necessary one or both parties can work on raising their score.
1 Year Prior: Determine how much you can afford.
The best way to find out how much you can afford is to create a budget. You should record your expenses, list your debts and set a goal. The standard rule is that your monthly payment on your mortgage should not exceed 28% of your income before taxes. So if you make $60,000, your monthly payment should be at or below $1400 per month. To find out how much you may be able to afford, use our calculator.
1 Year Prior: Research, research, research!
After creating a budget to determine how much you can afford, stick to looking at homes in that price range. This will give you a general understanding what kinds of homes you should look at, and which you shouldn’t. You should also decide what areas interest you, as some places are more expensive than others. For example, if you are considering both Cleveland and Chicago, be sure to note that Chicago is more expensive.
6-8 Months Prior: Get pre-approved.
Getting a solid pre-approval will allow you to identify how much you can afford each month on a mortgage. During a pre-approval, the lender considers your tax forms, W-2s, recent pay stubs, retirement, debt and savings to arrive at an accurate mortgage amount.
1-2 Months Prior: Pick an agent.
Choosing the right agent to guide you through the process is important, and can make all the difference when looking to buy. Great agents have experience, knowledge of the local market, demonstrated success based on their number of closings and communication skills.
Finally: Make an offer!
Now that you’re sure you want to buy the perfect home, you will work with your real estate agent to put in a formal offer. You should hear back from the seller regarding the status of the offer within 24 hours. In many cases, sellers take much less time than this, so it is likely that you will not be kept waiting long for an answer.
If you found this information to be helpful and you would like to move forward with purchasing a home, contact the Housing Buzz Team today!