Buying a home is an exciting adventure that marks a significant milestone in your life. If you're a first-time homebuyer and don't know where to start, we've got you covered with these basics for your home-buying journey.
1. Set Your Budget
Before you begin your home-buying journey, you need to determine your budget. Consider your income, expenses, and any savings you might have. Use our free Mortgage Affordability Calculator to help you determine how much home you can afford while considering your other monthly payments.
Your monthly mortgage payment amount should be no more than 30% of your monthly take-home pay. This includes principal, interest, homeowner’s insurance, property taxes, potential PMI (private mortgage insurance), and HOA dues. You can calculate your estimated monthly payment, including possible taxes and insurance, using our Mortgage Calculator.
2. Save for a Down Payment
Saving for a down payment is an important part of the home-buying process. The greater the down payment, the less your monthly payment will be. Ideally, you’ll want to put down at least 20% of the home price to avoid having to pay PMI. Also, consider closing costs and moving expenses on top of your down payment amount.
Dan Felix, Vice President of Mortgage Services at FAIRWINDS, offers this advice, “For home buyers with limited money for a down payment, here are some helpful steps to consider:
Talk with your lender about down payment assistance programs. It's reassuring to know that both conventional mortgages and FHA loans offer affordable options for those purchasing a primary residence.”
A great way to help you save is by setting up a separate My First Home Savings Account with the opportunity to receive a $1,500 closing cost credit when you finance your home loan with FAIRWINDS. Dan adds, “The My First Home Savings Account is a powerful tool for first-time home buyers. It assists in saving for the down payment and closing costs, which can be a major hurdle. By earning a cash reward, it accelerates your path to home ownership.”
3. Get Pre-Approved for a Mortgage
Getting pre-approved for a mortgage is a great way to understand how much you can borrow and what your interest rates may be. Once you have a preapproval, it shows sellers you’re serious about buying, and you can use your letter as an advantage in a competitive market.
Consider getting a 20-year fixed-rate loan to help you save thousands in interest and pay off your loan faster. Talk to one of our mortgage experts to see how much you could save.
4. Maintain Your Credit
A higher credit score can mean lower interest rates and better loan options. Avoid taking out new loans and lines of credit during your purchase process. Your lender will reevaluate your credit before closing, and new debts can potentially impact your pre-approval loan amount.
5. Find a Real Estate Agent
Finding the right real estate agent is a valuable part of your home-buying journey. They will help you to find the best-fit home, negotiate with sellers, advise you on home inspections, and potentially give you peace of mind. You want an agent who cares about your financial goals and offers guidance at every step of the home-buying process.
6. Start House-Hunting
With the help of your real estate agent, begin your search. Consider needs and non-negotiables like location, size, number of bedrooms and bathrooms, required repairs, and age of the home. Wants or nice-to-haves include other luxury items such as a fireplace, pool, or flooring. Once you have your completed list, share it with your real estate agent. This will give them the guidance they need to help you find your dream home within your budget.
7. Be Patient
There are several additional services and paperwork that must be completed before your home loan is finalized. On average, it may take 30-45 days from an accepted offer to close on your new home loan.
Dan says, “It's important to stay in close communication with your realtor, lender, and other professionals throughout the process to ensure a smooth and successful home purchase.”
Home buying can be a complicated process, but with the right guidance and a clear plan, you can successfully find and purchase a home within your budget. Remember to ask questions and seek the help of professionals like real estate agents and mortgage lenders. With careful planning and consideration, you'll soon be settling into your home-sweet-home.