How To Buy Your First Home
The idea of buying a home can be overwhelming, especially if you're doing it for the first time. If you want to buy your first home, here are some tips to make the process easier:
Make a budget
A budget is the most important part of buying a home. It's not just about how much you can afford to spend on your mortgage, but also how much money you need for all of your expenses--including utilities and other recurring costs like car insurance and groceries.
A good rule of thumb is to make sure that at least 30% or more of your monthly income is going toward paying off debt (credit cards, student loans) before even thinking about purchasing a home. And once that's done, there should still be plenty left over for living expenses like food and transportation; if there isn't enough left over after paying off debts then consider cutting back until there is more room in the budget!
Start saving money early
The earlier you begin saving, the more time you have to grow your money. If you start saving for a down payment at age 25 and invest $100 per month in an investment with an average annual return of 7%, by age 35, that initial $6,000 will have grown into more than $14,000.
That's a lot of money! And if it gives you peace of mind knowing that if something goes wrong--like having car trouble or a medical emergency--you'll be able to pay for it without having to take out a loan or ask someone else for help (which could damage relationships), then consider putting even more away each month.
Get pre-approved for a mortgage loan.
You might be wondering what the difference is between being pre-approved and getting a mortgage loan. In short, it's all about timing.
When you apply for a mortgage loan, you're essentially asking for money from the bank to buy your home. A lender will then run an analysis of your finances (including credit score) and determine if they think that you'll be able to repay them back with interest over time by making monthly payments on time every month. If so, they will approve your request! But there's no guarantee that this will happen right away--it could take weeks or even months before they make their decision depending on how busy things are at their office when they receive your application.
By contrast, "pre-approval" means that after completing an application with one lender (usually online), another lender has already decided that based on their review of this information plus additional details provided by third parties such as employers or landlords who know more about what kind of income people earn in certain areas than just looking at tax returns themselves; therefore making sure those numbers add up properly before giving out loans so as not risk losing money in case someone defaults on payments later down road due
Shop around for the best interest rate.
Shopping around for the best interest rate is one of the most important steps in buying your first home. You may be tempted to go with the first lender that gives you an offer, but this can end up costing you more money in the long run.
Instead, shop around and compare rates from different lenders before making any decisions on which one to use. A good way to do this is by asking your real estate agent for a list of lenders who will give you good deals on their loans; they'll know because they've worked with many lenders before and have heard back from clients about their experiences with them
Consider getting more than one lender.
When you're ready to buy your first home, consider getting more than one lender. The reason is simple: lenders are competitive with each other and will often offer better rates to get your business.
If you're able to get pre-approved for a mortgage loan, that's great! However, if it's not possible (for example, because of low credit scores), then don't worry--you can still shop around among different lenders while using this strategy.
Most importantly: before contacting any lender(s) or real estate agent(s), make sure that all of your financial information is in order so that they can give an accurate estimate of how much money they think they'll lend based on their guidelines and current market conditions (such as interest rates).
Set an acceptable amount of time to save up your down payment.
The next step is to determine how much money you can afford to put down. Most mortgage companies require a minimum of 5% down payment, but 10% is more common. The more cash you can put down, the less interest you'll pay over time and the quicker your equity will grow (as it's part of your loan balance).
A good rule of thumb is that if you plan on staying in one place for at least five years -- or if home prices are rising rapidly -- then consider 15% as an acceptable amount for a down payment on your first home purchase.
Figure out how much house you can afford.
You need to have a down payment of at least 20% of the purchase price. If you don't have that much saved, then you may need to consider renting until your savings grow.
You'll also want to make sure that your credit score is good enough for a mortgage lender to approve you for a loan. You can check this by getting free copies of all three of your credit reports from annualcreditreport.com and viewing them in full detail on sites like Credit Karma or Quizzle (Quizzle offers free access). You can also pay for more detailed analysis by heading over to WalletHub's Money Analyzer tool, which will give an overview of how well-positioned financially you are based on factors including income-to-debt ratios and savings rates--and whether or not it would be wise for someone like yourself who has recently graduated college but hasn't been working long enough yet before making any big purchases such as houses."
Buying a home is a great investment, but it's not for everyone.
Buying a home is a great investment, but it's not for everyone. You need to be able to afford the monthly mortgage payments and have enough money for a down payment. You also need good credit and a steady job.
If you meet all of these criteria (and more), then congratulations! You're ready to start looking at houses in person or online through websites like Zillow or Redfin (we'll talk about those later).
Conclusion
Buying a home is a great investment, but it's not for everyone. If you're not sure if buying is right for you and your family, take some time to think about how much money you can afford to spend on a monthly mortgage payment and whether or not that amount would be better spent elsewhere (like paying off student loans). If buying does seem like the right choice, then get started by making sure your credit score is in good standing before applying for pre-approval with lenders who offer rates based on this information (i.e., banks or credit unions). From there, shop around for interest rates at different institutions until finding one with terms that work best for both parties involved!
