First-Time Home Buyers: What To Do Before You Begin To Look

family.jpgBuying your first home can be an overwhelming experience. Here are a few tips of how to be better prepared for the home-buying process.

Buying your first home may be one of the most exciting—and scary—things you ever do. It’s definitely one of the largest investments you’ll ever make. So before you dive into the process, take some time to prepare yourself. Following are a few tips to prepare yourself before you begin to search for your dream home.

  1. Get a copy of your credit report. Your credit score could determine how much you qualify for and what interest rate you get on your mortgage loan—or if you even qualify at all. Before you begin shopping for a lender, get a copy of your credit report. By law, you can request a free copy once a year from the three major credit reporting agencies. Make sure everything listed in your report is accurate and fix anything that isn’t. (Learn how to improve your credit score.)
  2. Find a lender and get pre-approved. Shop around for a lender that provides you with the right deal. However, do not choose a lender simply because they have the lowest rate. You need to take all costs into consideration, including the APR, loan fees and any points attached to the mortgage. Once you’ve selected a lender, ask for a pre-approval letter. This letter will explain how much you qualify for and tells the seller of your potential new home that you’re ready and able to buy.
  3. Find a good buyers agent. A buyer’s agent represents only you, the buyer, and keeps your best interests in mind throughout the home-buying process. Ask friends and family for referrals and talk with several agents before selecting one. Consider how responsive the agent will be to your calls and whether you will enjoy working with him or her.
  4. Save for a down payment. The more you have for a down payment, the more money you will save. A larger down payment not only reduces your monthly mortgage cost but may also garner you a better interest rate. Aim for at least 10 percent of the total purchase price. A 20 percent down payment will save you even more as you won’t be required to pay a monthly private mortgage insurance (PMI) fee.
  5. Save for closing costs. There are a myriad of expenses associated with the process of purchasing a home, called closing costs. The amount you’ll be required to pay before collecting your keys varies from state to state, but expect to pay between 2 and 6 percent of your loan total. (Learn how to save on closing costs.)
  6. Save for unexpected costs. Unless you’re purchasing a brand new home with a homeowner’s warranty, it’s a good idea to set aside some cash to pay for any unexpected issues that may arise when you move in. Maybe the curtains you assumed came with the house are suddenly gone when you arrive, or the furnace dies the week after you move in. You’ll want a cushion you can tap into should for any unexpected costs.

Ready to start looking? Keep these tips in mind.

This article contains general information. Individual financial situations are unique; please, consult your financial advisor or tax attorney before utilizing any of the information contained in this article.

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Source: Investopedia, denverrealtyexperts.com, LendingTree
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