UPDATE: While somethings have changed, much of this information is still relevant to buying your first home in 2015. Check out our more recent blog post about tips and tricks for buying in 2015.
Preparing now for your home buying adventure next year will help make the process easier, and will help you buy that house earlier in the year. If you get started with small steps now, you can become a 2013 first time home buyer with no real headaches. The Boy Scouts of America use this for part of their motto, but it works in the home buying world too: Be Prepared.
From credit scores to down payments to paperwork, there's a lot you can do now to prepare for the home buying adventure ahead of you. Let's take a look at 5 steps you can take now so you can become a first time home buyer in 2013.
- Save up cash. Down payments are a necessity in almost every mortgage loan option out there today. Yes you have a couple of zero down payment mortgage options, or you might find some first time home buyer help with local grants. But having cash saved up for that down payment and the closing costs will put you well ahead of the game. If you don't need it at the closing table, you have it for furnishing your new house. Saving up small amounts each month beginning now will make this process less painful on the wallet.
- Pay down debt. Your debt levels will affect your credit score. If you want to become a first time home buyer in 2013, you need to get any debt under control. A good number to keep in mind is 30%. Keep all credit lines (like credit cards) at 30% of the max - or less than that if you can.
- Gather paperwork. As you've probably heard, paperwork is the backbone of the home buying process. Income verification, tax forms, bank statements, DNA samples...well, maybe not quite that bad. But you'll need some serious paperwork for your mortgage loan application. The more prepared you are now, the easier it will be to gather the necessary documents.
- Understand your credit history. A mortgage consultant will pull your credit report from the 3 main credit reporting agencies - Experian, TransUnion and Equifax - and use the middle score (known as a tri-merge credit report). Sometimes credit scores can differ from a consumer pull, pulling for car loans or store credit cards and applying for a home loan. Because of this, having your score isn't necessary. However, knowing what's on your credit report can help ensure that you're doing the right things when it comes to your credit. Make sure no outstanding issues are on there, and ask a mortgage consultant what needs to be addressed.
- Research. Begin the research phase now and start exploring first time home buyer loan options. Are you considering a fixer upper home for your first house? Maybe a renovation mortgage is in your future. Are you a military veteran? Maybe a VA loan is for you. The bottom line is this: You have many mortgage loan options that all have different pros & cons and rules. The more you understand them, the better off you'll be in your 2013 first time home buyer adventure. Look for a first time buyer resource center with videos, guides and articles. A mortgage banker who offers this wants you to be a successful buyer.
Here's a bonus tip: mortgage pre-approval is vital in the home buying process. Step one should not be house hunting and dreaming of the perfect home. You should instead talk to a bank or mortgage consultant about your financial situation. Get to know the area so you know the tax base and home prices. This will help you gear your house hunting to homes you can afford. Watch the video below for a quick run down of this.
See the embedded video here - Mortgage Pre-Approval Before House Hunting: 60 Second Mortgage Tip
Start the research phase right here. Download one of our most popular guides to better understand the home buying process. This 30-page eBook includes a glossary of real estate terms, credit tips and more. Get your "First Time Home Buyer Kit" at the button below.
*This post was originally published October 25, 2012, and has since been updated for accuracy and comprehensiveness.