Are you thinking about buying your first home? You’re not alone – this year it’s estimated that hundreds of thousands of people will take that big step into the American Dream and purchase their first home. That process can be at times confusing, overwhelming, and sometimes downright scary, but usually turns out to be the best (and happiest) investment you’ll ever make.
The good news is that there are ways to prepare for your first home purchase. It’s recommended you start planning and strategizing about 6-12 months before you are ready to sit in a realtor’s car and write offers. By following this simple checklist, you’ll be ready to enjoy the process, make the best financial decision, and find a great new home. Just remember to invite us to the house warming party!
5 ways to prepare before buying your first home:
1. Sit down with a mortgage officer.
The biggest mistake I see wet-behind-the-ears buyers make is that they go out and look at houses first, before they even know the details of their loan. Remember that you are not buying the house, per say – you’re buying the money to buy the house, in the form of a mortgage. Talking to a good mortgage loan officer will help you answer all of the important questions – how much house can we afford, what will our payments be, how much money do we need to put down, and can we even qualify for a loan?
2.Take a hard look at your credit score.
The loan officer you talk to will most likely pull your credit report and give you a copy. Talk to a credit professional about where your credit is at and what can be done to increase your score in advance of a home purchase. It’s been documented that even a 20-point bump in credit score can save you tens of thousands of dollars over the course of your new loan. Too many people try to increase their score by fiddling with their credit themselves (paying down debt, closing accounts, paying off old collections, etc.) and end up doing much more damage than good. Blue Water Credit offers a complimentary consultation and would love to help, and work with your loan officer.
3.Know what you want.
Now the fun part – you get to actually talk about houses. I recommend making a list with your needs and wants. Most likely you’ll want a mansion in the best neighborhood for the lowest price, but, unfortunately, it doesn’t work that way. So decide on criteria that are negotiable, or can be changed later (paint colors, hardwood floors, etc.) versus the important stuff that you’ll be stuck with (location, location, location, square footage.) Take a few weekends to drive through those neighborhoods, go to open houses, look through listings, and generally get familiar with what is out there – and realistic.
4.Find a great realtor.
As you are looking at homes online, asking around, and going to open houses, inevitably you’ll meet a bunch of great realtors who are willing to help. You’ll want to work toward a decision about who you are going to work with. Realtors are paid only on commission – not out of your pocket – so it’s only fair to commit to one person and not waste their time. Find someone who you like, who really cares, knows the neighborhood you want to buy in, knows the market, etc. It doesn’t have to be someone who’s been in the business forever, just someone who is good at their job and cares and is willing to hustle on your behalf.
5.Get your money right.
Based on the recommendation of your loan officer, and what you find on your credit report, it’s wise to get your financial house in order before your literal house. Save money for the down payment, to show a solid savings account, paying off debt if needed, and allocate money toward the cost of home inspections, appraisals, repairs once you move in, etc.
One last thing – ask a TON of questions! Don’t be afraid, because the better educated you are, the more enjoyable the process will be – and you’ll make the best decision choosing your first home.
Feel free to contact us with any questions, or if you’d like to connect with some great realtors or loan officers in your area.