Your First Steps To Buying A Home

Buying your first home is one of life's greatest moments, but the journey to get there can be intimidating. After all, there are many steps associated with the home buying process — so there can be a lot to learn for those not familiar with the real estate industry. As a result, it's not surprising that we often meet first-time homebuyers who don't know where to start.

If you're looking to buy your first home, there are a few simple steps you'll want to review before you begin the process. Here is where to start:

1. Save For A Down Payment And Closing Costs
Before you search for a home, you'll need to make sure you have cash on hand to cover both a down payment and a closing costs. A 20% down payment is required if you wish to avoid paying a monthly PMI (private mortgage insurance) fee; however, obtaining a home loan with as little as 10%, 5%, or even 3.5% down is possible depending on your income. 

A down payment is only part of the story — you'll also need to save for closing costs. Closing costs can range from 4% to 8% of the home's price and are comprised of several different fees that support the closing process.

2. Obtain A Mortgage Pre-Approval
A mortgage pre-approval is basically an endorsement from a lender that signals you're eligible to finance a home. In order to obtain a pre-approval, you generally need to submit tax returns and W-2s for the last two years, your last two pay stubs, and your bank statements for the last 60 days; however, exact documentation varies by lender. You'll also need to authorize your lender to do a hard credit pull in order to obtain your consumer credit report. 

Once the lender does a high-level evaluation of your financial situation, you'll be issued a pre-approval letter with a ballpark figure of what you can borrow. This letter will signal to sellers and listing agents that you're a serious shopper and are ready to transact.

3. Find A Good Real Estate Agent
As a first-time buyer, you need an experienced real estate professional in your corner to guide you through the complex process. A real estate agent will help you with your home search, draft your offer, negotiate terms, and support you through the closing. He or she is also a consultant that can answer your questions and prevent you from making mistakes. Real estate websites and contacting local brokers is a great way to find an agent; however, many shoppers find an agent through word of mouth, so don't hesitate to ask for recommendations from friends, family, or neighbors.

4. Determine Your Criteria
Once you have an agent and a sense of what you can afford, it's time to decide on other home criteria. At a high level, you'll need to decide on the location, size, condition, parking, and other amenities that are important to you. From there, your real estate agent may help you find properties that are a match, or they may set you up with an automated search on the Multiple Listing Service (MLS) website, a database of properties for sale.

5. Start Shopping
As you begin to discover prospective properties, work with your agent to schedule showings or attend open houses when available. Keep in mind, shopping for homes can be an emotional roller coaster. You may encounter a number of homes that aren't quite right or that miss the mark before finding one that's a good fit.

These steps will put you on a path towards owning your first home. Just remember, doing your research ahead of time and allowing time are the best ways to reduce the stress associated with first-time home buying.

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