Buying your first home is an exciting moment in your life. Before opening up those real estate apps and immersing yourself in photos of your dream home, give yourself time to invest in logistical planning. Doing your homework now will give you an edge in a competitive market and learn how to prepare for first-time home-buying.
1. Assess Your Debt
Lenders want to be sure you can handle your current debt in addition to your expected new mortgage payments. Have a clear understanding of your debt-to-income ratio. A good rule of thumb is not to exceed 36% of your gross monthly income. Getting your existing debt down is imperative before starting the loan application process.
2. Know Your Credit Score
Your credit score directly impacts your mortgage rate. The lower the score, the higher the rate. Checking your credit score before starting the process will help you understand where you stand and what you need to do to improve your rating before applying for a loan.
3. Review Your Budget
Your budget will be different once you become a homeowner. Not only will you be adding a monthly mortgage payment into the mix, but you will also have property taxes, home maintenance, and home insurance to include, along with a few other miscellaneous payments. Consider keeping two months of reserves in savings as a cushion to help with your budget.
4. Determine Your Down Payment
Your down payment is the cash that you bring to closing. Often there is a requirement to put something down, but that number will vary depending on the purchase price of your home. A typical down payment is between 3% and 20%. It’s important to note that the higher the down payment, the lower the risk you appear to a mortgage lender.
5. Get Preapproved
Once you have cleaned up your credit and paid down your debt, it’s time to get pre-approved for a loan. The pre-approval is a valuable step in the home-buying process. Not only will you know exactly what you can afford, but you will also present yourself as a serious buyer. Knowing your purchase power up front will help guide your search and save you from disappointments in the future.
Now that you have learn how to prepare for first-time home-buying, closing is just around the corner. Ohio Real Title can help ease the stress of your real estate closing transaction when you buy your first home. Contact us today to learn more.
