As more millennials start to think about homeownership, first-time homeowners are on the rise. But not everyone is as prepared as they should be.
There are some obvious questions first-time buyers need to answer, such as “What can I afford?”, “Where do I want to live?” and “What size home do I want?” But some less obvious considerations need to be asked as well, including things about school districts, neighborhoods and access to public transportation.
Here are some things first-time homebuyers should be doing to make sure they’re prepared:
Choose a Reputable Agent
Buying a new home is one of the most important decisions of your life, so you want to make sure you’re working with someone you’re comfortable with and who has a strong reputation. This doesn’t mean you have to go with the most experienced person—some might prefer to work with an eager up-and-comer—but make sure it’s someone who will communicate with you the way you want and knows the neighborhoods you’re interested in.
Get Your Finances in Check
Just because you have money in the bank doesn’t mean you will qualify for a mortgage. Meet with a financial advisor and get a handle on what you can truly afford. If you want to do the numbers yourself, make sure to create a comprehensive list of every possible expense—loans, student debt, monthly expenses—and don’t rely on your lender to figure out a total for you. Lenders look at your debt-to-income ratio and not necessarily at your day-to-day spending habits.
Now that you know what you can afford, check that the bank agrees with the assessment by getting pre-qualified for a loan. The pre-qualification process is not a guarantee that the lender will offer you funding, but it does take into consideration your credit score and income level. This will determine how much the lender might be willing to offer through a mortgage program. The next step is getting a pre-approval letter so that when you find your dream home, you can offer proof that you can get the financing to buy.
Shop for Lenders
Mortgage rates are still great, but that doesn’t mean you should jump at the first one that comes along. Compare at least 3 – 5 lenders to determine which one best serves your interests. Make sure to disclose that you’re a first-time buyer because that could potentially make a difference in the types of programs a lender offers you.
Seek Out First-Time Homebuyer Programs
There are a slew of programs designed specifically to assist first-time homebuyers with benefits, such as down payment assistance and no closing costs. Others offer first-time buyers competitive interest rates designed to make borrowing easier. Be sure to understand what’s out there to help you.