Step 1. Preparing for a Home Purchase
Getting Started: Is Homeownership Right for you?
The first step in the home buying process is understanding your financial condition and making a clear decision on whether or not home buying is the right option for you. The difference between renting vs buying is so vast, and each come with their own list of pros and cons.
Here are some questions to review before moving forward in your home buying process:
- Do you prefer to maintain the property yourself or have it maintained by others?
- Is your current financial status stable?
- Do you have the necessary savings needed for a home purchase: including down payment, closing costs, loan origination fees, etc?
- If this is a second home, vacation home, or investment property do you have the additional funds required for down payment (generally 20%)?
Something that will help you is to make out a list of pros and cons of buying as well as renting. Buying a home is not for everyone and remember- there is no one best decision for everyone. If homeownership is the right decision for you, you must be financially and emotionally ready for the responsibility.
Buying a home is one of the greatest experiences you’ll have in your lifetime, but it can also be one of the most stressful situations if you run into financial hardships. Overall, take an honest look at your lifestyle and you and only you can decide what is best for your current and future needs for your family.
FINANCIALS: GETTING FINANCES IN ORDER
To get a good understanding of your current financial status and credit worthiness you’ll want to get a copy of your full credit report. You can get a free copy of your credit report once a year from AnnualCreditReport.com. Scores can range from approximately 300 to 850, and generally a higher credit score (740+) will get the best interest rates, loan terms, and lower down payment allowance.
Before speaking with your loan professional we encourage you to get a copy of your free report, so if there are any errors you can dispute them prior to applying for your home loan.
Financials: Calculating Your Budget
In order to make an informed decision on homeownership it’s important to know your current budget and figure out what you can comfortably afford before your big purchase. Start by completing your household budgeting plan and find out how much cashflow you have each month and your financial stability.
Financials: Mortgage Calculators
Some expenses to know about prior to starting your home loan process are down payment, loan rate, closing costs, insurance, title fees, loan origination fees, etc. To get a good idea of all costs involved in your home loan, utilize our mortgage calculator, affordability calculator and closing cost estimator.