Many first-time home buyers begin their journey by letting their fingers do the walking, perusing sites like Zillow and Redfin. Before you know it, they fall in love with a home they think is in their budget.
Before you shop, the first step should always be getting your finances in order and creating a plan.
Shop Lenders, Not Rates
Choosing a loan program through a mortgage lender you trust is much more valuable than shopping for an interest rate. Interest rates generally remains competitive throughout the industry. Be sure to choose a mortgage lender that listens to your needs, answers all your questions, and addresses your concerns.
Receiving a certified pre-approval assures sellers that your credit reputation is solid. Sure, you can simply get pre-qualified for a mortgage by filling out a short questionnaire. However, by giving your loan officer additional documentation, pre-approval gives you more negotiating power when buying a home. Documents include W-2s, tax returns, paystubs, assets, and employment verification.
Build a Nest Egg
A down payment is necessary in most loan scenarios. Although you’ve probably heard 20 percent, there are loan packages that require less money down. Regardless, be prepared to tap into that nest egg, and not just for the down payment. There is an array of additional costs that should be factored into whether you are ready to purchase a home or not. On top of the listing price tag, be prepared to pay fees to third parties processing your loan and government taxes. Items also include pre-paid interest, homeowner’s insurance, property taxes, as well as closing costs, appraisal costs, home inspection and credit reports.
Good Credit Goes a Long Way
Your FICO score says a lot about you as a borrower. The better your credit, the better your loan rate. Avoid major purchases or opening new lines of credit, which can ding your credit score and impact both your loan decision and interest rate.
You’re Ready to Shop
Time to hire a realtor! Although the Internet is great place to start looking at potential homes, it cannot take the place of a qualified real estate agent. A professional who has been around the block can guide you through the process, providing tips and tricks to help the entire experience run smoother and less stressful. Just as you did with your mortgage lender, find someone who listens.
Dream Big but Remain Practical
Finding a home is exciting, perhaps something you’ve been thinking about for a long time. Besides mapping out how many bedrooms and bathrooms you want, pay close attention to priorities that may impact you in the future. Consider location, schools for kids, or proximity to entertainment and shopping. Also consider how long you intend to stay in the home and how much work you’re willing to put into a home. Bottom line: be prepared.