4 Steps Home Buyers Should Take Now

Regardless of whether you’re a first-time homebuyer or a seasoned pro, the process of buying a home can be daunting. It’s crucial to have a clear understanding of your financial capabilities and how to achieve your goals.

Step 1: Strengthen Your Credit Score Now

Maintaining a healthy credit score can open up a world of possibilities in the long run. If your credit score needs improvement, paying off credit card balances in full and avoiding new credit applications before closing on your home can be beneficial. Refrain from closing revolving credit lines, as it could negatively impact your score.

For first-time buyers with little credit history, it’s advisable to build at least twelve months of your own credit history with three credit lines.

Step 2: Calculate Your Debt-to-Income Ratio

To qualify for a mortgage, it’s crucial to maintain a positive cash flow, meaning your income is greater than your debt expenses. Your debt-to-income ratio will determine how much you can afford to borrow, but it’s important to create a budget and decide on a comfortable spending limit. While your lender can provide guidance on affordability and credit improvement, taking proactive steps to manage your finances can make all the difference.

Step 3: Save Up (a little) for a Down Payment

There are a lot of misconceptions about down payments, which have discouraged some people from taking the plunge to buy their first home. While some believe they need 20 percent of a home’s purchase price for a down payment, there may be alternative options available for 100% financing or reduced down payments.

Step 4: Do Your Homework

Before making an offer, it’s important to obtain pre-approval for a mortgage. Research the various types of home loans available to determine which option best suits your needs. Seek guidance from a reliable lender who can help you understand the differences between fixed-rate mortgages and adjustable rate mortgages (ARM), and which option makes the most sense for you. Be aware of additional costs such as discount points, origination fees, and closing costs, and make sure everything is disclosed upfront to avoid any unpleasant financial surprises.

Navigating the home buying process can be overwhelming, but with the right guidance and support, it can be a rewarding experience. Partnering with trustworthy individuals who have your best interests in mind is key to making informed decisions and achieving your homeownership goals. Ready to get started with a Mortgage? Get Pre-Qualified now.