Buying Your First Home

For many people, homeownership is a major player in the American Dream. Before you sign on the bottom line, be sure you are financially prepared and have a good understanding of how the process works. Unfortunately, many people begin shopping for homes before shopping for mortgages. Researching mortgages and getting pre-approved should be the first step towards home-ownership. Once a lender has reviewed your income, debt and credit history, they will give you a pre-approval letter for the amount they have agreed to loan you for a home purchase. Buyer beware, however, as many lenders will approve you for more than you can actually afford on a monthly basis. Before you meet with a lender it is a good idea to work out a detailed monthly budget (include everything down to your dry-cleaning bills). From there, determine what amount you feel comfortable spending on housing per month, including property taxes and homeowners insurance. Tell your lender this figure and she will tell you what that equates to in a purchase price, or mortgage amount depending on how much money you will be putting down.

Be sure to explain your circumstances to the lender such as how long you plan to live in the home and the money you have to work with for a down payment. This will determine what type of loan will work best for you. If a deal sounds too good to be true, it probably is so make sure you have a good understanding of how the loan is structured in order to avoid surprises in the years to come. Also, be a good consumer and shop around for the best rate and terms. Not all lenders are created equal so it is best to go with a referral from someone who has done business with the lender in the past, or ask for references.

Buying a home is a long-term obligation and should not be taken lightly. A few things to consider before making this commitment are job security, credit history and money in the bank. How stable is your job? Do you like your job/company? If you or a spouse is considering a job change or going back to school it might not be the right time to take on a mortgage. Even if your credit history is marginal, many lenders will still loan you money. However, it will be at a higher rate and fees than someone with good credit. If you have some blemishes on your credit report, consider taking care of them by paying off credit cards, closing unused lines of credit from department stores and paying bills on time. Find out from a knowledgeable lender what you would need to do to get your credit score to a place where rates and fees would be the best. If there is ever a time to have a nest egg in the bank, it’s before buying a home. You will need to have reserves above and beyond the down payment and closing costs for the unexpected expenses of homeownership.

Don’t let the American Dream turn into a nightmare by being uneducated about the process before you start. Always consult a lender and a real estate agent (in some cases an attorney or tax advisor) before you begin looking for a home. -Andrea Stanaway. The Buckley Jolley Real Estate Team has three full-time Buyer Specialists ready to help you with your purchase. Call today for your FREE consultation 810-229-7000.