Congrats! You’ve set a goal to become a homeowner. Owning a home is one of the strongest investments you can make in your financial future. Let me help you with five effective steps to prepare to make your home-ownership dreams a reality.
Buying a home will likely be the biggest purchase you ever make, so it’s important to feel prepared, mentally and financially, before doing so. If you’re reading this, odds are that you’re someone who likes to have a plan or a roadmap. I’m so glad you’re here! Follow these five steps to get ready your home-buying journey.
1. Create a savings plan
Purchasing a home means that you’ll need to pay for the down payment upfront. Sometimes, first-time homebuyers don’t realize that they’ll also be paying for closing costs (usually 3-5% of the purchase price), too. Make sure you have a healthy savings account so that you feel comfortable with the down payment, closing costs, and some room for an emergency fund once you move in. Keep in mind that depending on the loan programs you qualify for, you may need as little as 3-5% for the down payment as opposed to the standard 20% down that people often talk about.
2. Lower your debt-to-income ratio
Pay off as much debt as you can— credit cards, car payments, student loans, medical bills, etc. The lower your debt-to-income ratio, the more you may be approved to borrow.
3. Reflect on home ownership and what it means to you
Buying a home is a really big deal! It’s important to reflect on why you want to buy a home, what homeownership means to you, and what’s important to you in a home and the home-buying process.
4. Find a Realtor
Find a real estate agent you trust. They will guide you through all the steps to purchase a home and help to connect you with other key players in the process like mortgage lenders.
5. Get pre-approved
Getting pre-approved for a loan will allow you to understand your budget and what you can afford. It can also allow you to estimate monthly payments. This is critical to understanding what to expect in both searching for a home and for planning your life financially after the purchase.