Things to Do Before Buying Your First Home
Are you thinking about purchasing your first home? Most first-time buyers find the entire process harder to navigate than they thought. For this reason, we created the First-Time HomeBuyer Checklist. It provides a 12-month timeline that helps you avoid typical mistakes, such as getting stuck with the wrong property or paying too much interest.
12 Months Out
The most important thing to do is to confirm your credit score. You can check out your credit report at annualcreditreport.com. The three main credit bureaus (TransUnion, Equifax, and Experian) are required to provide you with a free credit report every year. A study by the Federal Trade Commission established that one in four Americans pinpointed errors in their credit reports.
Likewise, 5% had errors that led to higher interest rates on loans. You can avoid last-minute surprises by checking out your credit score before you apply for a mortgage. This also gives you time to correct any mistakes that may appear on your credit report.
Establish What You Can Afford
You need to figure out the type of house that you can and want to afford. Typically, lenders look for a debt load of less than 43% of your monthly income. The figure includes other debts, including your car loan, revolving credit cards, student loan, and your future mortgage. Dozens of web calculators can help you determine how much you can afford.
Create a Down Payment Plan
Regular mortgages require you to make a minimum 20% down payment. Your loan costs are likely to be lower if you meet this threshold. Nonetheless, if you cannot raise this amount, you shouldn’t give up on your homeownership dream since several programs can be of help. For instance, FHA offers loans with a 3.5% down payment. However, they need mortgage insurance premiums, which might increase your monthly payments. Besides this, you can also qualify for other down payment assistance programs.
9 Months Out
At this point, you should prioritize what you want in your prospective home. Ask yourself about what’s most important. Is it the home’s proximity to your workplace? Or its location on a quiet street? By asking yourself such pertinent questions, you’ll make a more informed decision about the type of home that you want to buy. Also, you will determine what trade-off you are willing to make.
This is where the fun begins. You can leverage property listing websites such as Las Vegas Home Guide to research about neighborhoods as well as home values. Looking at potential houses will keep you motivated to keep on reducing your debts as you save for a down payment.
Open a Home Maintenance Account
Once you identify a suitable property, it’s advisable to open a home maintenance account. It’s good to start setting aside some money for funding repairs, maintenance, and any other emergencies.
6 Months Out
This is the best time to collect your loan papers. Lenders are quite particular as far as mortgage loans are concerned. Often, they demand lots of paperwork. This includes:
- W-2 forms or business tax return forms in case you are self-employed
- Two or three-year personal tax returns
- Your recent pay stubs
- Loan and credit card statements
- Bank statements
- Residential addresses for the past 5 to 7 years
- Brokerage account statements for the past 2 to 4 months
- Recent retirement account statements including 401(k)
If you collect these documents early, it lessens the stress and hassle that accompanies the loan application process. You should also look at your loan documents regularly. This will help you stay focused on meeting the down payment threshold.
Research REALTORS® and Lenders
You should start evaluating buyers’ agents to come up with a list of those who will work in your best interests besides shepherding you through the buying process. Your property agent can also recommend a lender who is familiar with home buyer programs for first-timers.
3 Months Out
Get Pre-Approved For Your Mortgage
If you have been following this guide, your paperwork, down payment, and credit score should be on track. Three months out, you should have done your research on buyers’ agents and lenders. You should now start engaging them. First, you must get pre-approval for a mortgage. This entails making an appointment with your mortgage broker or lender who will run a credit check to determine how much mortgage you are approved for. Generally, it’s advisable to borrow less money than the ceiling allowed by the lender. You should also draft a budget that takes into account your mortgage payments, maintenance costs, insurance, and any other expenses.
Start Shopping For Your Home
Once you get pre-approved, the agent that you chose should start looking for homes within your price range. In doing so, you won’t waste time looking at houses that are beyond your reach.
2 Months Out
At this time, you should be ready to make an offer for the home that you prefer. Usually, it takes up to six weeks to close on a home. Therefore, give yourself time to close early, especially if you already have a move-out date.
Get the Home Inspected
The first thing to do once a seller accepts your offer is to have the home inspected. If the inspector establishes that there’s something that requires repairs, the deal’s closing may be delayed.
In the Last Month
At this point, you should counter-check your financial documents to ascertain that they are all in order. Similarly, lending documents ought to be reviewed before closing. If your documents have been kept up to date and the down payment is at hand, these final steps will be hassle-free. The hard part may be reviewing the mortgage documents, but your agent should guide you through.
Do the Final Walk-Through
This should be done one or two days before closing. That final walk-through of the new home helps you ascertain that it is in the desired shape.
Arrange the Bank Transfer
This is the final step in the home buying process. It entails arranging a bank wire transfer of the money required at closing. Ensure that you get the exact amount needed for closing. Talk to your bank a few days before closing so that they get the numbers right.
Are you looking to purchase a home in Las Vegas and its environs? We are here to help you find your dream home. Contact us to begin your search.