This is an important first step to analyze your financial history and creditworthiness. You can go to freecreditreport.com to get this information.
Knowing what you can afford will help narrow your focus even more. Use a simple mortgage payment calculator to get your estimated debt-to-income ratio and see how much you can expect to pay monthly for principal, interest, taxes, insurance, and of course your current monthly bills.
The largest upfront cost will be your mortgage down payment and closing costs. Plan for this ahead of time by organizing a savings budget to help you prepare. A down payment calculator can help estimate different down payments with their corresponding monthly payments.
Begin organizing your finances and cleaning up any issues. Use your credit report from step one to identify any issues with creditors or debts. Contact creditors and ask for payment plans or work with an attorney to help clean up issues.
Owning a home means maintenance costs and possibly other unexpected costs. Get in the habit of putting aside money each month for repairs, emergencies, and general home costs (think vacuum, light bulbs, cleaning supplies, etc…).
Calculator: Home Budget Calculator
Finally, the fun part! Begin a home search of places you want to live that align with your anticipated budget, lifestyle, and future plans. Consider your home type. Do you want a single-family detached home, a condominium, a paired home, a covenant controlled home, etc…?
Search: MLS Home Search Tool
We encourage everyone to learn a little about mortgage programs to have a general idea of what you might be interested in and what options are available. A mortgage consultant can discuss specific programs based on your situation. Though, generally speaking, mortgages are based on time and interest.
Learn: Available Mortgage Programs
Since this is the most time-consuming element of preparing for a mortgage, we suggest you start 6 months ahead of when you think you’ll apply for a mortgage. Some documents you will be able to find easily, others can take a little digging. Note that some of these documents may be outdated by the time you submit a mortgage application, but knowing where and how to get them will make it easier if you need more recent documents.
Not all lenders are the same. Take the time to research several local and online mortgage lenders. Prepare your questions to know how the lender communicates with borrowers and what expertise they have with first-time home buyer programs. The last thing you want is a lender that misses an important detail or ideal mortgage program causing you costly fees or potentially costing you the perfect home.
About 3 months out, you’ll want to start getting things verified. Obtaining a pre-approval letter shows your commitment to your real estate agent (buyer’s agent), the listing agent (seller’s agent), and the seller themselves. It’s important to know the difference between “pre-qualified” and “pre-approved” as one is much stronger than the other when submitting an offer on a home.
Friends, family, strangers you meet at parties; it seems everyone knows a real estate agent. Ask them for referrals, or do a local search for someone you think can best help answer your questions. If you’re starting a real estate agent search, contact our sister company, American Home Agents, and they can connect you to a local real estate agent.
Now that your mortgage pre-approval is in place and you’ve connected with an agent, it’s time to search for a place to call home. Talk with your agent to discuss your goals and requirements for a new home. Gather information from each house and take pictures to help you recall the features of each property.
PDF Download: Home Features Comparison Sheet
Once you know your budget and have found a home you love, it’s time to work with your realtor on making an offer. The written offer will include details regarding the purchase price and terms, the amount of earnest money you’ll be using, any contingencies that the deal may be subject to, an offer expiration, and much, much more. Once your offer is made, the seller can accept, counteroffer, or decline the offer.