1. Decide how much home you can afford
Generally, you can afford a home priced 2 to 3 times your gross income. Remember to consider the necessary homeowner costs which must be covered: property taxes, insurance, maintenance, utilities, and community association fees, if applicable.
2. Develop your home wish list
Be honest about which features you must have and which you’d like to have. Remember, this is your first home, and you may be able to work up to those like to haves the next time, but you need to be able to make payments on this one first.
3. Select where you want to live
Drive through the neighborhoods you think you may be interested in. You may want to make a list of your top-five community priorities, such as commute time, schools, and recreational facilities.
4. Start saving
Have you saved enough money to qualify for a mortgage and cover your downpayment? Even though ideally you should have 20% of the purchase price set aside for a downpayment, an FHA loan only requires 3.5% downpayment which can be a lot easier for a first time homebuyer to obtain. A small downpayment preserves your savings for emergencies and you will still need to consider closing costs.
6. Get your credit in order
Have you saved enough money to qualify for a mortgage and cover your downpayment? Even though ideally you should have 20% of the purchase price set aside for a downpayment, an FHA loan only requires 3.5% downpayment which can be a lot easier for a first time homebuyer to obtain. A small downpayment preserves your savings for emergencies and you will still need to consider closing costs.
But Remember... The lower your downpayment, the higher the loan amount you’ll need to qualify for, and the higher your monthly payment.
5. Ask about all the costs before you sign
A downpayment is just one homebuying cost. Your REALTOR® can tell you what other costs buyers commonly pay in your area—including home inspections, title and attorneys’ fees. Keep in mind the extras you’ll also want to buy after you move-in, such as window coverings and new furniture but don't buy these until you are closed on your new home.
6. Get your credit in order
Your REALTOR® can help suggest several mortgage representatives to find out how your credit stands and you can pick the one you feel most comfortable with. You can also order your credit report directly - You’re entitled to free copies of your credit reports annually from the major credit bureaus: Equifax, Experian, and TransUnion. A credit report details your borrowing history, including any late payments and bad debts, and typically includes a credit score. Lenders lean heavily on your credit report and credit score in determining whether, how much, and at what interest rate to lend for a home. Most require a minimum credit score of 620 - 640 for a home mortgage.
7. Get prequalified
Meet with a lender to get a prequalification letter that says how much house you’re qualified to buy. Start gathering the paperwork your lender says it needs. Most want to see W-2 forms verifying your employment and income, copies of pay stubs, and two to four months of banking statements.
If you’re self-employed, you’ll need your current profit and loss statement, a current balance sheet, and personal and business income tax returns for the previous two years.
Other web resources are listed in link below in the Homebuyer Training Voucher Program under Cerified Home Buying Training Agencies.
Get a free credit report from each of the three credit reporting bureaus
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