Many of my clients are first-time homebuyers. They come to me so excited about buying thier first home and I love that. However, they often are not prepared and once we cover the process, expenses and lender expectations they realize they are months out from being ready.
To purchase a home, one must have decent credit, low debt, an income respective of the amount you choose to spend and some savings.
Credit: This is important because it effects your borrowing power and your interest rate. The minimum score to qualify is going to be 640. Higher is better. If you are not there, clean it up by paying off debt and clearing up any disputes.
Debt: Lenders consider your debt to income ratio. This is a calculation that changes periodically but expect something less than 30% debt to income and you will probably be good. That does not include rent but does include car payments, student loans, medical payments and credit cards.
Income: Lenders look at your income which must be verifiable through pay stubs and income returns. Bonuses are not usually accepted and it is more difficult if you are contract or self-emplyeed but not impossible. The old rule of thumb was your borrow ability was 2.5 times your income. It's more complicated to compute but if you compute that sum, it will give you a general idea.
Closing costs: There are expenses involved in buying a house - charges from the lender and the title company plus appraisal, survey and inspections. In a down market you can ask the seller to help cover these costs but in a "hot" competing market like we have today it's less likely.
In addition, it's important to understand the current market. You can't rely on a friend who purchased years before because markets change. Ask your REALTOR.
If you are shopping in the Austin area, ask me. I'm available to help you get ready to purchase and to purchase.
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