A Guide to First-Time Homebuying

Buying a home for the first time can seem like a tremendous undertaking. It can take time to find a property that checks off every box on your checklist and that you can see yourself growing old in. With proper preparation and research, you can make the homebuying experience less intimidating, bringing you one step closer to your forever home. Below are some things to consider before purchasing your first home:

How much should I have saved?

Before you even begin the homebuying process, you need to take into account how much money you have saved up and how much you are willing to spend on a mortgage. You do not need to have the sticker price of your dream home sitting in your bank account. However, the more you have to put towards a down payment, the less you will have to borrow.

If you are not quite ready to purchase a home, but are interested in putting money aside, consider opening a certificate of deposit with terms ranging from six months to five years. If you are looking to avoid tying your money up in a long-term investment, try opening a money market account to help earn you interest to go towards your new home.

How much can I spend?

It is also important to determine what you can afford to spend per month on mortgage payments and other housing fees after factoring in your other expenses. Most financial experts recommend not spending more than 28% of your monthly gross income on housing costs. For example, if your monthly gross income is $5,000, you should aim for $1,400 of housing costs per month, or an estimated home purchase price of $298,000. Before you begin house hunting, track all your expenses for a month or two to give you a realistic estimate of what you can afford in terms of a mortgage. This will allow you to see what areas you may need to cut back on before purchasing your home. It is also important to consider things like property taxes, maintenance, homeowner’s insurance, and the cost of furniture/appliances when determining your spending ability.

Do your research.

Prior to contacting a real estate agent or touring homes, it is important to do your research and have a clear definition of the type of home you want to buy and where. Which neighborhood would you like to live in? If you have or are planning to have children, which school system has the best programs? Are you interested in living in a single-family home or a multi-family residence? These are all important things to narrow down before you start your search.

Create a wish list.

In addition to researching the location and type of home you would like, it is a great idea to make a wish list with every aspect/feature you want your future home to have. This will help you prioritize your wants and needs in terms of housing and help weed out homes that do not suite you. You can add or take items off the list once you start touring homes if you decide a feature is more or less important than anticipated. The wish list will also help you in communicating to your real estate agent what exactly you are looking for. If you do not have a lot to spend, but have a long housing wish list, try looking for a home that you can fix and add value to over time. While you may not currently have the money for a large deck and a pool, you can purchase a house within your budget and later add value to your home by incorporating the rest of the items on your list.

Where do I find a real estate agent?

The easiest way to find a real estate agent is to ask around to your family and friends if they have anyone that they have worked with and would recommend. This way, you can learn the agent’s capabilities from people you already know and trust. If your family and friends do not have anyone in mind, you could try attending open houses or looking for agent signs near the neighborhoods you would like to live in. If you would prefer to find an agent online, try Googling agents near you or try an agent matching service.

Financing your home.

 In the process of finding your forever home, how do you go about financing your purchase? You can start by meeting with a mortgage originator or specialist. Many states and financial institutions offer first-time homebuyer programs that you can take advantage of. Here at Navigant, our First-Time Homebuyer Program is simple and easy. An example of the mortgage process is as follows:

Mortgage pre-approval: Your mortgage pre-approval will require that you submit information regarding your employment, income, assets, and debts. Before you begin putting offers on homes, make sure to get pre-approved for a mortgage. This will give you a competitive advantage over other offers and let the sellers know that you are interested and capable of the purchase.

Submit mortgage application: After finding the perfect place for you, meet with a mortgage specialist. They will help you find a loan option that works for you and go over the documents needed to finalize your application. With the help of your real estate agent, you will need to submit information regarding your property which will include the street address, expected sales price, real estate taxes, and the size of property. After this information has been provided, you will receive your loan estimate.

Processing mortgage application: Your mortgage specialist will hand off your application to a loan processor, who will develop a complete package for the underwriter. At this stage, your credit report will be pulled, your employment and bank deposits will be verified, and a property appraisal and title search will be ordered.

Underwriting: The underwriter will make sure you match the requirements of the loan product for which you applied. Once the underwriter approves your mortgage, the interest rate for your loan is locked and cannot change. When verifying your application, the underwriter will let you know if they need more information.

Approval and closing preparation: Three days before closing, you will have the right to receive and review the closing disclosure. The title insurance will be ordered before closing so that you can walk away with the keys to your new home. Make sure to check on your closing costs and to talk with your loan officer about how you will transfer the costs if they are not already rolled into your mortgage.

Closing: Congratulations! After signing the necessary documents, you are officially a homeowner.

After you move in.

Once you are all settled into your new home, it is important to continue to put money aside in case of emergencies. If a tree happens to fall on your roof in the middle of a storm, you want to be prepared. If you are interested in adding value to your house without taking another loan out, try finding a DIY project online to aid you in your home renovation. If you want to purchase furniture or appliances to go along with your new place and are on a budget, try looking at sites like Facebook Marketplace. And most importantly, enjoy your new home!

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