You’re excited, ready to make that huge investment and purchase your first home. There’s so much to think about… credit scores, down payments, and mortgages. The following are steps you can take to make sure you’re ready for the wonderful world of homeownership:
Determine what you can afford.
It’s crucial to know how much house you can afford before you start your new home search. When you find the perfect home, you want to make sure it’s in your price range. A good rule of thumb is to make sure your total monthly mortgage payment is under 30% of your gross income. But, your best bet is to talk with your lender.
Prepare your finances.
- Check your credit score: Your credit score will affect your interest rate. Poor credit scores lead to higher mortgage rates and higher monthly payments. You want your credit score to be at least 620. Generally, any score under 620 is considered a weak credit score. Many lending institutions consider a 700 credit score as good.
- Save cash for your down payment and other expenses: Typically, a down payment is between 3.5% and 20% of the purchase price. Keep in mind, you will have other expenses such as property taxes, insurance, moving costs, etc.
- Collect documents you will need to verify your finances: Once you’re ready to put an offer on a home, you will want to collect the documents you’ll need to verify your finances on your mortgage application. You will need: paystubs, W-2’s, bank statements, and copies of your last two tax returns.
Begin mortgage shopping.
When making an offer on your first home, a free mortgage pre-approval portrays you as a serious and qualified buyer. You will want to compare rates. You can do this with the leading online mortgage lenders or you use LendingTree to quickly get four or five competing rates from different banks.
Taking these steps before you search for your first home will help you be prepared for one of the biggest purchases of your life. Coldwell Banker Innovations has experienced Realtors who would love to assist you search for houses for sale. We have offices in Hagerstown, Frederick and Greencastle.