The First Time Home Buyer helper's guide
Before anything, the decision to buy starts in your mind!!!
This is absolutely 100% true! Before we begin this amazing yet demanding endeavor, the decision to buy starts in your mind! Once you have your mind made up on buying, you're going to need to know some necessary steps to get you into the home that you set out for. Buying a home for the first time can feel like a complex journey. It's best we initially sit down to consult on what your situation is, what type of home you are looking for, and how I can help you achieve all of that for you.
So let's take a look at how we'll start your journey...
The 1st Step: Determining your current financial situation
This is what will navigate your purchasing power for a home. Before we even start searching, you''ll need to gather and organize your financial information in preparation for what's called, pre-qualification. The pre-qualification is a necessary step to see your range of home prices, interest rate, MONTHLY PAYMENT and loan options you'll have to purchase a home. This stage can be a ton of paperwork!
Finding the right lender is key, especially one that is driven, knowledgeable, and can close loans on time. There are numerous lenders out there that can help you with pre-qualification, and if you're in need of finding one, I will connect you with my most trusted lender. In fact, I worked with him to buy my very first home!
Starting pre-qualification, the lender will need 3 main financial sources from you. I call them the BIG 3 because they are the 3 most important factors that will determine exactly where you stand financially in order to make your first home purchase. The BIG 3 include...
- Income, W2's, 1099's, Bank Statements and Tax Returns
- Credit Score
- Savings
What a great lender will do when determining your purchasing power for a home, is to prepare you for upcoming costs you'll incur with buying a home. Out of your SAVINGS, you'll have to prepare for costs such as Earnest Money Deposit, Down Payment, Closing Costs, and Mortgage Reserves.
The earnest money deposit is what you put down to show good faith, once your offer has been accepted by the seller. Typically it's around 1-3% of the offer price and will be used towards your down payment at the time of closing.
The down payment is not what it once was, there are many loan programs available to help keep a low down payment, especially for first time home buyers. First time home buyers don't have large amounts of equity built up to apply towards a down payment, so some programs such as FHA, make it so you can put down as little as 3.5% of the purchase price. Other's like VHDA, USDA, and VA loans can help further help keep even lower down payments.
Closing costs will be what you pay at the time of closing and are mostly one time fee's along with a few first round payments into the recurring fee's that will be rolled into your escrow account along with your mortgage.
Having mortgage reserves in your savings is highly important to lenders, which helps to solidify your ability to carry a monthly mortgage payment. You'll need at least 3 X's the amount of your monthly payment in your reserve savings for this to be effective. Lenders want to see you're responsible as possible, so the more you have effectively accomplished the BIG 3, the greater your chances will be for securing the best loan for you.
2. Once we know your affordability, let the house searching begin!
Congratulations, on moving beyond your first large and important step within the home buying process! It was a lot of paperwork, and quite the task of organization...so now it's time search for the home you want!
From here, click on BUY WITH LANDON and go to Step 3 to see how we will move further along the journey to owning a home!