You're ready to move out of your parents' house or your rented apartment. It's time for a new chapter in your life. But you probably have many questions about buying a first home. Where should you begin?
Virtually every new home buyer is going to need to secure financing of some sort, and naturally you want to be sure you qualify for the best rates and terms available. Get copies of your credit report several months before you begin your home search. Be sure the information reported there is accurate, and clear up any inconsistencies before you forge ahead. Refrain from opening new credit accounts for a full year before you plan to apply for a loan. Lenders want to see you as a consistent customer.
It's best to have a realistic idea of the price range that's affordable for you. Just because you qualify for a certain dollar amount doesn't mean you should commit to anything before you've taken a hard look at your own circumstances.
Make a list of the fixed costs you will incur each month, including property taxes, insurance, car payments and any other bills that will be the same each month. Add a high estimate of your utility bills and other variable costs. Build in a cushion for unexpected costs, such as car or home repairs.
Lastly, take a hard look at your lifestyle. If you just can't live without dining three out nights a week, a new wardrobe each season, or a fabulous vacation every year, this is a definite factor to consider. Look at your spending versus your income, and use this to help figure out what you can realistically afford to spend on your mortgage. Mortgage calculators are available online to help you determine your purchase price range, considering your down payment and desired monthly mortgage payment.
If you have a good relationship with your bank, you can begin there. Or talk to a mortgage broker - he/she could also have a wide range of products to offer you. Many large real estate companies have brokers they work with on a regular basis.
Be prepared with income, asset, and debt information. You'll be asked for a couple years of tax returns and up to several months of pay stubs in order to verify your income. Be honest. If you have any credit issues in your past, they will certainly come to light. Remember, these professionals are working to help you achieve your goals, and trust is an important element of the process.
Buying a first home is a big undertaking. Be patient and open-minded.