You’ll only buy your first home once! With the right preparation, you can shop for a house, apply for a mortgage, and close the deal with confidence. Begin your homebuying journey by following these important steps:
Clean Up Your Credit.
Create a plan to pay off or pay down any outstanding high interest credit to make it easier to obtain approval for a mortgage.* Here are a few things to be aware of while creating your plan:
- Monitor your credit: Get a copy of your credit report and look it over. You can get a free copy of your credit report from AnnualCreditReport.com. You may want to dispute any discrepancies.
- Use credit cards sparingly: Use your cards for items you can pay off at the end of the month, and make the payments on time. Keep debt at least 30% below the limit in order to keep your debt-to-income levels manageable.
- Open a secured credit card if you don’t have one: If you’ve had trouble getting approved for an unsecured credit card because of poor or unestablished credit, a secured card will help you get back on track. A secured card requires you to make a cash deposit (usually less than $500) that becomes the credit line for that account. Be sure to pay the bill on time every month, to show a stable credit history. Also, be sure to get a card that reports your good payment behavior to the credit bureaus.
- Talk to a mortgage consultant before making any debt decision: It’s important to talk to a mortgage consultant to make sure any activity you’re considering will not negatively affect your credit score.
Talk to your mortgage lender about how much home you can afford and get pre-approved before you start looking. A pre-approval means that your lender has checked your credit and verified your documentation to approve a specific loan amount. With a pre-approval letter in hand, sellers and real estate agents will view you as a more powerful buyer over someone who hasn’t yet talked to a lender. Once you find your dream home, you can make an offer knowing exactly how much you can comfortably afford.
Determine Your Priorities.
Take the time to truly think about exactly what it is you are looking for in your first home. Make a list of what you want, need, and don’t want in a home. Rate your desired home attributes and give a copy to your real estate agent. This will give your real estate agent an exact idea of what you’re looking for, allowing them to narrow down the home search. Determining your priorities, combined with already being pre-approved, will save both of you valuable time and effort.
Research State and Local Assistance Programs.
In addition to federal programs, many states offer assistance programs for first-time homebuyers with perks such as tax credits, low down payment loans, and interest free loans. Before buying a home, check your state or community’s website for information on housing grants and programs available in your area. Your lender can also be a valuable resource as many local lenders partner with federal and state organizations to offer assistance programs.
Ready to take the first step on the road to homeownership?
*Not intended as credit counseling, accounting or investment advice. Contact your financial representative for more information.