Getting Ready to Buy Your First Home? Here’s What You Need to Know
Understanding Your Budget
Before starting your home-buying journey, it’s essential to determine how much house you can afford. Experts recommend keeping housing costs below 30% of your gross income. Consider the following expenses:
- Mortgage payment
- Property taxes
- Homeowners association fees
- Homeowners insurance
- Private mortgage insurance
Calculate the total maximum amount you can afford to spend on housing, including all these categories. A handy home affordability calculator can help you with this step.
Saving for Home-Buying Costs
Create a savings plan to cover all potential home-buying expenses, including:
- Down payment (up to 20% of the purchase price)
- Closing costs (2-5% of the loan principal)
- Home emergency fund (1-3% of the home’s total value)
Gathering Essential Documents
Get your mortgage pre-approval documents in order:
- Pay stubs for the last three months
- Tax returns for 2-3 years
- Rent payments for 12-24 months
- Proof of savings
- Written agreements for borrowed funds
- Credit report with errors corrected
- Identification documents (social security card, driver’s license, etc.)
Finding the Best Mortgage Rate
Research different lenders, such as traditional banks and credit unions, and explore various loan options:
- USDA Loan
- FHA Loan
- Adjustable-rate mortgage
- Fixed-rate mortgage
Consider the mortgage term: a 15-year mortgage means being debt-free sooner, while a 30-year mortgage offers lower monthly payments.
Comparing Options and Making a Decision
Request quotes from multiple lenders and carefully review each contract. Compare closing costs and fees among your options. Choose the best fit for your situation, and celebrate this exciting milestone!
Getting Financially Ready
Schedule a complimentary call with a financial planner to help you prepare for homeownership. With the right guidance, you can achieve your goal of buying your first home.
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