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6 STEPS FIRST TIME HOMEBUYER CHECKLIST
Sources: https://www.inspireyoursuccess.com/home-buying-101/ https://artesiantitle.com/
Evaluate and Increase Your Credit Score First I recommend pulling your credit report. You can also use Credit Karma to make sure that your credit is in good standing. The higher the credit score the lower the interest rate you’ll get on your mortgage. If your credit score is under 700 it will be harder to secure a loan and would recommend increasing your score before you begin house shopping. Once you increase your credit score you can start the pre-approval process. Get Pre-Qualified I recommend getting pre-qualified before you start house shopping. This will ensure that you don’t look for prices you can’t afford and be let down when you have to find different houses. Don’t trust the Zillow listings and estimates either. Work with a realtor to submit some basic paperwork and get pre-qualified. *Disclaimer: Pre-qualified is very different than pre-approved. Pre-qualified is a simple process that can be submitted online. Pre-approval will require you to submit all financial documents, W-2’s, and tons of other paperwork. Estimate Your Down Payment Once pre-qualified play around with some mortgage calculators to figure out what your payments might be based on different down payments. Depending on where you live and your financial situation everyone will have a different amount for their down payment. I recommend starting with at least 10% down but I personally did 20% as my home was under $200,000. Once you estimate your down payment you can understand what your mortgage payment will be each month. Don’t spend more than 30% of your TAKE HOME (after-tax) pay on your housing. If something happens to the house you’ll be vulnerable if you have a change in your salary or additional upkeep costs. Be Prepared for Closing Costs Closing costs can be a real surprise during the home buying process. I was focused solely on the down payment and had no clue what closing costs were. Closing costs are separate than your down payment and used for all transactional costs. According to Zillow “Typically, home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing fees. So, if your home cost $150,000, you might pay between $3,000 and $7,500 in closing costs. On average, buyers pay roughly $3,700 in closing fees, according to a recent survey.” Use a closing cost estimate tool and talk with your loan representative to learn more about closing costs. Sometimes sellers are willing to negotiate paying for part or all of the closing costs.
Look Into The Future Think of buying a home as a long-term deal, similar to investing stocks (you’re in it for the long game, no the quick profit). Ask yourself these type of questions: Will this be your forever home? Do you plan on moving in the next five years? Will this house be the right size if your family grows? Will your job potentially make relocate in the future? Could you afford this home with only one income? Do you have enough saved in case of home repairs? Be very honest with yourself in answering these questions. Buying a home is a big investment and not one you can get out of easily. If you plan on moving within the next five years think twice before buying. Understand The Process of Homebuying The last step of the homeowner checklist is to understand the process of buying your first home. Here’s a very brief overview of the timeline of the home buying process: Get pre-qualified Find a house you love Put an offer on your potential future house Offer accepted Submit endless paperwork to be pre-approved Establish escrow period (think of this as the time until you move in, typically 30-60 days) Sign a ton of paperwork, cut the check for your down payment and closing costs Get the keys, pop a bottle of champagne & celebrate If you have passed this first-time homeowner checklist you can start looking for your first home.