Making the decision to begin preparing to purchase your first home is a major life decision. Make sure you’re in the best position financially by following these tips.
Set a budget | Before starting your home search, before browsing Zillow or other websites for homes available in your area, determine your price range. The calculation should take into account household income and savings set aside for a down payment. It should also account for other monthly expenses you will continue to be responsible for, such as car payments and other loans. As a general rule, after paying your down payment, you should still have enough money in your reserves to cover three months of your monthly expenses, should something happen.
Monitor your credit and make improvements where possible | While you may begin your home search looking at home sale prices, your credit score will play a large role in determining what you can actually afford as lenders use that score to determine how much money they are willing to lend you and at what interest rate. The difference of just a few percentage points in interest rate can cost you thousands over the life of your loan.
Save up for closing costs | It’s not just the down payment you’ll need to have saved for. Closing costs — that is, those costs associated with appraisals, home inspection, credit reports, attorneys and homeowner’s insurance — can cost you thousands more on top of what you may have already been expecting to spend. Don’t be blindsided. Keep those costs in mind throughout your home search.
Establish your priorities | You may have a decent idea of what you’re looking for in a home, but consider writing down your “must-haves” so that you can refer back to them during your search. What may seem like a simple step can save you some serious consternation in the future as you are able to stay focused on what you really need.