Buying Your First Home

Scott McEachern |

Recently I've partnered with a mortgage broker and real estate agent to host quarterly Home Buying Seminars. These events are filled with lots of information about saving for your down payment, the home buying process and making sure you have the right type of insurance in force, as well as lots of time to answer your individual questions. Below are some of the topics we cover at those seminars.

One of the biggest (financial) decisions you will make in your life is buying a home. While home ownership is not for everyone, it remains a goal for many. And while browsing real estate websites looking at homes can give you an idea of what’s available, and help determine what you’re looking for, home ownership is much more complicated than simply picking out an attractive home.

Let's start at the beginning of the process.

One of the first things you need to do is determine whether you’re ready to be a homeowner. This readiness factor encompasses both your financial and your mental status, with both ideally in a place that makes home ownership a viable step.

While it’s likely you’ll know when you’re mentally ready, how will you know when you’re financially ready?

When determining your financial readiness, remember that home ownership will ultimately cost much more than renting when you factor in the cost of homeowner’s insurance, mortgage insurance, and property taxes. You will also be responsible for all maintenance costs, such as repairing or replacing appliances, landscaping, and general property upkeep.

Most mortgage professionals suggest that you keep your housing expenses between 25 and 30 percent of your annual income. This means that if your current annual salary is $100,000, your total monthly mortgage cost should not exceed $2,500. Obviously, once you make the decision to purchase a home and locate a mortgage broker, they will work with you to determine just how much home you can afford. You also need to consider the other costs involved with the home buying process, such as inspections, a down payment, and closing costs. If you'd like to be referred to a trusted mortgage broker, please let me know.

While you may be eager to start the process, before you contact a mortgage broker, check your credit. Be sure to run a complete credit report, not just your current credit score, since that will be what your mortgage broker will use to determine your eligibility to obtain a mortgage as well as what your current interest rate will be. Check your report for inaccuracies and be prepared to provide a written explanation for any detrimental items on your credit report, even if they are several years old.

The next step in the home-buying process is to become pre-approved. Many realtors will not even show a home without their clients being pre-approved. Plus, the pre-approval process will determine just how much home you can afford, and give you a bargaining chip in the negotiation process when you do find a home you wish to purchase. In order to get pre-qualified, you’ll need to provide your chosen mortgage professional with basic information such as annual income, bank account balances, and length of time on the job. This information helps the broker determine how much you are qualified to borrow. It’s also important to remember that a pre-approval is not a guarantee that a loan will be offered.

Once these tasks are completed, you can start the fun part; looking for your first home!

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