Buying a home for the first time, can be such an exciting, but also nerve wracking process. As one of the biggest milestones you’ll have in your life, it’s important to learn everything you need to know about the process to help make the transition into homeownership as easy as possible.
So, what exactly are the steps to homeownership? Well, let’s start with the basics:
1. Save for a down payment
The first and most essential part of home buying is saving. Though not all loans require you to put a down payment, there are other additional fees that you’ll want to account for in preparation to buy. As a first-time homebuyer, a down payment of 3.5% is usually required. In addition to the down payment, you’ll want to factor closing costs and moving expenses into your budget.
2. Take a look at your credit
There’s a common misconception with new homebuyers that you need at least a 20% down payment and your credit score needs to be in tip top shape before you can even think about buying a home. But, that’s not true. As a first time home buyer, you can actually qualify for a loan with a credit score of 500. Of course, the higher your credit score the better chance you have at qualifying for a good mortgage rate, but don’t let that low credit score discourage you from becoming a homeowner.
3. Determine how much home you can afford
Before you start your home search, consider getting pre-qualified to determine how much you can afford. This will help you understand how much money you should be saving and narrow down your options once it comes time to search for a home.
4. Connect with a mortgage lender
When you’ve got your finances in order and feel you’re ready to start looking for homes, you’ll need to shop around for a mortgage lender who can help you through the process. Mortgage lenders are responsible for offering the home loan and borrowing guidelines can often differ from lender to lender, which is why it’s important to shop around. Mortgages can get confusing, so don’t hesitate to ask your mortgage lender questions to help you understand the process further.
5. Start house hunting
Once you have a loan approved, it’s time to start shopping! Connecting with a real estate agent in this step of the home buying process may be a smart option, especially as a first time home buyer. They will be able to guide you through the process by answering any questions that may arise and help you pick out the right house that’s within your budget.
Homebuying can sometimes be a stressful journey, so to make sure you stay organized during your home search, FHA Loans created a free printable house hunting binder to help you have a successful home buying process from start to finish.