6 Steps to Take Before Buying Your First Home
/If you’ve reached the point in your life where you’re ready to buy a home, congratulations! While it can be easy to get swept up into your excitement and dive head-first in the house-buying process, it is important to take a moment to prepare. To ensure that you make the best investment, minimize stress, and of course, end up with a home you love, there are several steps you should take before buying your first home:
Review Your Finances
Even if you are making an income that you’re confident will qualify you for a home, the first thing you need to do is review your actual finances. Determine how much you have in your savings, what your monthly discretionary income is, and how much money you’re currently spending on rent that will go toward your mortgage instead. You’ll also want to consider any potentially large upcoming expenses. Once you have an idea of your current financial situation, you can begin to look at price-ranges in your desired housing market.
Research the Local Market
You might have a rough idea of how much homes are selling for in your town but there are certain factors that can affect price so it’s important to do in-depth research. Look at housing trends for the time of year you’re planning to buy, the average cost of the size home you want, and whether the neighborhoods you’re interested in have HOA fees. If you’re going to be living alone, it’s also important to factor in safety when choosing a place to live.
Create a Budget & Save
Now that you have a realistic idea of how much houses cost in your area, you likely have a price range in mind. The important question now is — are you in a position to afford the down payment and mortgage, or do you need more time to save? Saving up for your new home sounds intimidating but it can be fairly easy if you plan properly. Don’t think of this as a setback but an opportunity to take your time researching and planning so the process is as smooth as possible from here on out.
Get Pre-Approved for Your Mortgage
Speak with a lender as soon as possible to see how much you can qualify for. Once they review your financial information, they will be able to provide you with an estimate for your house budget as well as the loan amount you can get approved for. Typically, this requires financial documents like your W2’s to verify your income as well as your credit report. But if you’re self-employed this might not be your best option because these documents usually don’t best reflect your actual income. Instead, you may be better suited for one that is based on your bank statements. As more and more people start their own businesses, bank statement loans in Arizona and other states with quickly growing economies have become increasingly popular.
Once you’ve been pre-approved, you will have a letter from the bank stating that you are pre-approved for a mortgage. This can be a powerful asset when a seller is choosing between you and another buyer.
Create a List of Must-Haves
Once you know what you can afford, you can get to the fun part. You’ll want to create a list of qualities your home needs to have. If you have a dog, a nice backyard might be on your list. Love to cook? You’ll probably want to have an island in the kitchen so you have plenty of space. A popular must-have for many women searching for a new home is a specific number of bathrooms or bedrooms depending on the size of their family. While it’s necessary to have some non-negotiables on your checklist, you should also know where you’re willing to compromise.
This information will be valuable to your realtor when they are helping you narrow down your search.
Find a Real Estate Agent
Once you have all the preparations taken care of, you can begin the real search for your new home. While a real estate agent is not absolutely necessary, they can be very helpful during the process, especially if you’re busy with work. If you have a recommendation from a friend or colleague, that’s a good place to start but reading reviews online is also reliable. You want an agent who will listen to your wants and needs and be an ally in navigating the home-buying process.
It might seem like there’s a ton that goes into just getting ready to buy a house, but now that you’ve laid the foundation, everything should move forward much more smoothly.
About Money & Mimosas: Money & Mimosas was started as a passion project by Danetha, a former NFL cheerleader and CFO. After a brunch conversation with girlfriends, Danetha was inspired to launch a resource to learn how they could all enjoy life while being smart with their money. Because who doesn’t want to have their money and mimosas, too?
