Becoming a homebuyer is an exciting and significant milestone in life. However, the process of buying a home can be a bit overwhelming the first time. You may be unsure if owning a home is right for you and the steps to take towards becoming a homeowner. In my 2023 Spring Buyer Guide, I outline some of the factors which play into owning a home and steps you can take to confidently navigate the process. Here is a summary of some of those key points which I recommend to take into account if you want to get ready to buy a home.
Renting vs. Buying
If you are currently renting a home, you might be considering buying a home instead. Buying a home can help you escape the cycle of rising rents. For decades, the cost of rent has consistently risen, making it harder to put aside savings to purchase a first home. However, homeowners can take advantage of a fixed-rate mortgage to lock in their monthly payment for 15 to 30 years.
Additionally, homeownership is a powerful wealth-building tool. Each mortgage payment increases your ownership stake in the property. As the homeowner, you gain equity over time as home values appreciate. This is why on average, homeowners have a higher net worth than renters. Nationwide home prices grew on average by 58.4% in the last five years and by 289.1% since 1991 (according to the Federal Housing Finance Agency).
Find a Professional You Can Trust
“The success of your homebuying journey largely depends on the company you keep. As you set out to find the right home . . . be sure to select experienced, trusted professionals who will help you make informed decisions and avoid any pitfalls.”
- Freddie Mac
It is important to find a real estate professional you can trust when navigating the complex process of buying or selling a home. This person will bring extensive knowledge of the local market and industry expertise. They should also have an understanding of current market conditions and trends, as well as be able to help you navigate the administrative process and meet certain deadlines. Perhaps most importantly, your real estate professional should be someone you trust to be honest, ethical, and transparent throughout the entire homebuying process.
Tips to Reach Your Homebuying Goals
Once you’ve decided to work towards buying a home you can follow certain strategies to get you closer to your goal. In order to obtain a home loan and a favorable mortgage, it’s important to work on your credit. Start by monitoring your credit, keep track of your spending record, and improve your score by paying down your debts.
You can also plan for your down payment by setting aside a portion of each paycheck into a homebuying fund and working with a professional to explore options for down payment assistance.
Get pre-approved for your home loan. A pre-approval from a lender will help you better understand what you can borrow for your home loan so that you can plan accordingly. (More on this below.)
Prioritize your wants and needs by creating a list of features that you seek in a home. Then categorize them by Must-Haves or Nice-to-Haves to determine what is actually essential. Then you can review this list with your agent when searching for homes.
What to Know About Pre-Approval in 2023:
Pre-approval is when a lender tells you which types of loans you may be eligible for and how much money you may be able to borrow, as well as what your rate could be. This will give you critical information to help you understand your options. Your pre-approval is based on your finances.
By having a pre-approval, the seller will know that you are a serious buyer and therefore they can feel more confident in your offer. This could make the difference between the seller accepting or rejecting your offer.
Things to Avoid When Applying for Mortgages
Consistency is of high importance when applying for a mortgage. So be sure to be transparent with any changes in income, assets, or credit with your lender to avoid jeopardizing your application. During the application process don’t change bank accounts, apply for new credit cards, or close any credit accounts. Also, be sure not to deposit cash into your accounts before speaking with your bank or lender, don’t make any large purchases, and don’t co-sign other loans for anyone.
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