The Must-Do Checklist Before Buying Your First Home
Buying your first home is one of the biggest financial decisions of your life, and it's not without its many obstacles. First you have to find your dream home in a tight market, then save a significant down payment, and hopefully source a generous lender for the rest. Saving at all is extremely tough for first-home buyers, with student debt at an all-time high of nearly $30,000 per grad. But despite the odds, it's also a great time to get your foot in the door while the interest rates are still so low. If you're in the market, this MONEY checklist will help you prepare ahead of time.
12 months in advance
Make sure the time is right. Use Trulia.com’s rent or buy calculator to see if you’d really come out ahead, based on loan rates, taxes, and where rents and prices are headed in your area. Nationwide it’s 38% cheaper buying vs. renting.
Clean up your act. Devote this year to saving money and paying down debt. You’ll need at least 3.5% down for an FHA loan, or 10% to 20% for a conventional mortgage. Lenders also like to see job stability, so settle in for now.
Learn what you like. When a home catches your eye—a listing, say, or a photo—pin it to a board on Pinterest. Or try Swipe, a new app from the site Doorsteps, which lets you browse listing photos and mark them pass or save.
Six months out
Look better to lenders. To boost your credit score, order your free credit reports at AnnualCreditReport.com and fix any mistakes. Pay bills on time, chip away at credit card balances, avoid new debt, and don’t close any accounts or apply for new credit. The average credit score for approved mortgage applicants is 755.
Figure out what you can buy. Use an online calculator like the one at Zillow.com to estimate how big a house you can afford based on your income, savings, and debts. That’ll help you research homes and drill down on costs.
Forecast future bills
With an idea of how big a house you can buy, you can do a more detailed budget. Scan listings for property taxes on homes you like. Get a homeowners insurance quote at Insweb.com. Call local utility companies for the typical bills. And tack on 1% of the home’s value for yearly maintenance.
What money tips do you have for saving a down payment? Share it with us below.