Buying your first home sounds scary. It’s a huge investment and ensuring that you have your ducks in a row beforehand will make the process significantly more comfortable.
Here are 3 important things to consider when you’re preparing to buy your first home:
Credit Score
620-640 is the ideal minimum score to obtain a mortgage. Your credit score is essentially the way that investors (the people that loan you the money for your home) assess the risk associated with your loan. Higher risk means higher interest and higher payment. Focusing on improving your score, regardless of where you’re at currently, will always be beneficial when you’re interested in obtaining any kind of loan/mortgage. You can read about tips to improve your credit score here (add link to other blog).
Savings
You do not need 20% for a down-payment. I repeat, you do not need 20% for your down-payment. In fact, first-time buyers can qualify for as little as a 3% down-payment on their mortgage.
In addition to a down-payment, buyers will have closing costs that they’re responsible for paying at closing, as well. Closing costs tend to total roughly 2.5-3.0% of the total purchase price of the home.
All that being said, you’ll want to save approximately 6-7% of the total budget for your new home. For example, if you’re purchasing a home, you can expect your cash needed for closing to total approximately -17,000.
As an alternative to using your own cash, you can see if you qualify for a down-payment assistance program or negotiate seller concessions into your offer to cover your closing costs.
Timeline
When do you need to be out of your current home or apartment? On average, it takes a buyer 2-4 weeks to find a new home, assuming the buyer has realistic expectations relating to their budget and has a clear idea of where they’d like to live.
From the date of a buyer’s accepted offer on a new home, the purchase and mortgage
process typically takes 30-45 days. In addition, sellers can request up to 60 days of occupancy after closing. With all of this in consideration, allot roughly 4-4.5 months to complete your home search from beginning to move-in. Of course, it can always move a lot quicker than that, but when you’re coordinating a current lease expiration or move-out with a new home, it’s better to be safe than sorry.
Next Step
By focusing on these three factors when buying your first home, you’ll put yourself in an excellent position to have a great first-time buying experience.
First step after you’ve nailed down these three items? Find an experienced local real estate agent and get pre-approved for a mortgage with a reputable, local mortgage brokerage.
