Knowing what you Have
Start the home buying process by asking a few simple questions: (1) What is your total monthly income? (2) How much debt do you have? (3) What is your credit score? (4) How much money do you have for a down payment?
Your total monthly income includes earnings from employment, investments, and any other form of money received on a regular basis. Gather W-2’s, 1099s, pay stubs, tax returns, and other documentation that shows income. Business owners also need to provide profit and loss statements for a minimum of two years. Debt is any ongoing financial obligation for which a person is legally responsible. Examples of debt include rent, car payments, student loans, child support, and credit card accounts.
Most prospective homeowners will fund their purchases with mortgage loans. One of the primary factors in determining loan eligibility and interest rates is creditworthiness. You should obtain your credit report and score prior to reaching out to a lender. As a consumer, you can access your credit report free of charge. Many lenders have a minimum credit score requirement of 640 (although there are lenders who will give you a mortgage with a minimum score of 580). If your credit score is low, a nonprofit credit counseling agency can assist you by providing advice and a plan of action. A real estate agent can connect you to a lender that best fits your situation.
There are expenses associated with buying a home. The most significant expense is typically the down payment, which is the amount of money your lender will require you to pay up front towards the purchase of a home. Depending on the type of loan, your down payment could range from 3.5% to 20%. For a $100,000 home, a 3.5% down payment would be $3,500 and 20% down payment would be $20,000.
Knowing What you Want
Once you are pre-approved for a mortgage loan, a real estate agent can help you identify specific homes that match your preferences. Normally, location is the number one factor in determining where a person or family buys. Locations can range from downtown to suburban living, and vary based on school districts, neighborhoods, and proximity to shopping and recreational activities.
Potential homeowners also look for specific home styles such as ranch, two-story, split-level, cape-cod, or Victorian. New builds are a popular choice, but some people may prefer existing homes that are move-in ready while others want a “fixer upper.” Homes feature a wide variety of floor plans and amenities. Consider using a checklist to identify those preferences that match your needs and lifestyle.
A real estate agent can assist you in bringing together what you have and what you want to ultimately result in the purchase of your new home. Whether you are looking for a three-bedroom Colonial with an open floor plan, or a custom new build with a spectacular owner’s suite, real estate agents can connect you to people, agencies, lenders, and other professionals that can transform your home buying dream into a home owning reality.