Buying your first home can feel like an exciting, yet daunting, process. A starter home might not be your forever home, but it’s a crucial first step toward building wealth and putting down roots. Here are three essential things to keep in mind when it comes to finding the right property and financing your starter home.
Starting your home buying journey can raise many questions. Fortunately, you don’t have to navigate the process alone. Building a team of trusted experts is crucial for a smooth experience. Begin with your mortgage loan officer, who will help you get pre-approved, determine your price range, and guide you through the loan process. You’ll also need a reliable real estate agent to assist with finding the right home. Your agent will be there to help you make an offer, negotiate, and close the deal on your starter home.
One of the first steps in buying a home is getting pre-approved for a mortgage. Your loan officer will review your credit report and assess your ability to buy a home. They’ll look into your income, assets, and credit score, so be prepared to provide documents such as pay stubs, W-2 forms, and bank statements. The loan officer will also evaluate your debt-to-income (DTI) ratio, which is a critical factor in determining your loan eligibility. This ratio is calculated by dividing your monthly debts by your household’s gross income. The lower the DTI ratio, the better! Your credit score will also play a major role in the type of loan you qualify for and the interest rate you receive. A higher credit score generally means a better rate, so it’s wise to monitor your credit before applying.
Once pre-approved, it’s time to start house hunting! With the help of your real estate agent, you’ll begin exploring homes within your price range. As you look at properties, think beyond just the house itself. Consider the neighborhood: Is it close to work, schools, shopping, and amenities? Think about the future resale value, too. Even as a first-time buyer, it’s important to look at how easy it will be to sell the home later on.
Now is also the perfect time to create a homebuyer’s checklist. List your must-have features, such as the number of bedrooms or bathrooms, and think about what you can compromise on. Perhaps you’re looking for a large yard, a finished basement, or walk-in closets—make sure these features are on your list.
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