The more you know about the home-buying process, the more money you’ll save. While searching for a home for the first time can be exciting, stories of mistakes and the housing market crisis have also given the process a bad rep. But your experience doesn’t have to be the same. To help you out, we rounded up five first-time homebuyer tips to help you leap into homeownership with as little fanfare — or fear — as possible.
Do Your Homework
You might be thrilled about buying a home, but you need to do your homework before getting started. Specifically, you’ll want to learn about your financing options ahead of time, so you know exactly how much money you qualify for and have an idea of what types of homes are within your budget. This will also help you avoid disappointment when you start shopping around if no properties are available in your price range. Take some time to read up on mortgage options and terms before diving into the real estate market.
Get Your Finances in Order
Before buying a home, you should pay off all of your debt, such as car payments, credit cards, and student loans. You should also have 3-6 months of expenses in an emergency fund and save up at least 10-20% of the home price for a down payment. For example, if your annual income is $80,000, this means saving between $8,000 and $16,000 before applying for a loan.
Submit Your Documents Early
As soon as you decide to purchase a home, review your credit reports and credit score from these three major credit bureaus — Equifax, Experian, and TransUnion. Contact each company directly or use an online service to order them. Review each report carefully to ensure there are no errors. Once this is done, start gathering all your financial documents, including your W-2s, tax returns, bank statements, etc.
Work on Improving Your Credit Score
Your score has a significant impact on what sorts of loans you’ll be able to obtain and for what interest rate. If your credit score isn’t great, it’s worth looking into ways to improve it before applying for a loan. Many credit repair companies can help you with this process; some may charge a fee or even require an upfront payment in return for their services. However, there are also plenty of online resources that can help people who are trying to improve their credit in their own time frame.
Get Preapproved
If you’re looking at homes with a realtor, they’ll want to see documentation showing that you’ve been preapproved for a mortgage loan before showing you any properties. This will prove to them that you’re serious about buying and not just looking around aimlessly. So, make sure to apply for preapproval.