I Want to Buy My First Home--Where Do I Even Start?
Renting was fun while it lasted, but you're ready to say goodbye to leases and make a long-term commitment. But when you want to buy a home, where do you even start? Let us break down the steps and help guide you to owning your first home.
Make a plan
The very first step in buying a home is making a plan. We know, we know. It sounds boring and you're ready to start seeing homes and dreaming about the backyard barbecues you'll throw in your new place. But making a plan is really just putting those dreams down on paper. How long do you want to stay in the house? Do you see yourself starting a family while you live there? What neighborhoods are you excited about--or are you interested in finding the next up-and-coming neighborhood? Make your plan and you'll have a much easier time going through the rest of the steps.
Check your credit score and make a budget
Taking a good, hard look at your financial situation is the key when you're buying a house. Start by checking your credit score. For a point of reference, you need a score of at least 580 for the 3.5% down payment on an FHA loan. If you plan on putting down the full 20% on a loan, you should shoot for a score that's 660 or above in order to get a better interest rate. That credit score tells the lender you have a record of paying your bills on time and there's not a very high risk in lending money to you. If your credit score is lacking, start taking steps to improve it now.
The second financial piece you need to think about is how much you want to spend on a house. Make a budget to see how much you're spending every month and see what kind of monthly mortgage payment you feel comfortable with. From there you can use our mortgage calculator to see how much you should spend on a house.
Now that you have your plan and financials in order, it's time to find a mortgage broker and get preapproved for a loan. Getting preapproved assures the sellers that you'll be able to get a mortgage big enough to back up your offer on their home. It shows them that you're a serious candidate and helps the process move along quickly and smoothly. When you're choosing a broker to preapprove you, remember it's okay to shop around for a mortgage broker to make sure you get the best rates.
Find an agent
After you have your plan, your financials, and your preapproval, it's time to find a real estate agent or Realtor to work with. You're going to be spending a lot of time with your agent while you're driving around and looking at houses and finding the right agent might be the difference between getting the home of your dreams and missing out. Be sure you take the time to interview a couple agents and make sure it's going to be a good match.
Congratulations! You're on your way to buying your first home! All that's left is finding that dream home and making an offer.