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You may have spotted the perfect two-bedroom ideal for starting your life on your own or for growing your family. You instantly imagined yourself hanging pictures, having a barbeque, and making a classic Minnesotan oasis in your own backyard. Before you can consider buying that home, though, there’s a laundry list of must-dos before you should even get your heart set on that perfect Tudor.
By making sure your T’s are crossed and your I’s are dotted, you can feel confident searching for the home you’ve always dreamt of. While hunting for your first home is undoubtedly one of the most fun parts of this process, here are other things you should check off your to-do list:
One of the most important reasons for getting tedious legwork out of the way before shopping the market is because the last thing you want is to find a home you love only to discover it simply doesn’t work with your budget. By finding out what you can afford will save a lot of heartache down the line.
Two ways to feel out what’s most comfortable for your pocketbook are pre-qualification and pre-approval for a mortgage. Finding a lender for a home mortgage may seem intimidating, but can be done without breaking a sweat. Are you a member of a bank or credit union you trust? Ask them about their mortgage rates and potential opportunities. Or, seek lenders elsewhere; at a Savings and Loans office, a mutual savings bank or a correspondent lender. Once you’ve looked at a few options, compare rates. By starting the conversation with a lender you trust, the sooner you can get an idea of how much home you can afford.
Pre-qualification: Mortgage pre-qualification is a lender’s tentative estimate of how much you can borrow for your home. A pre-qualification might only include your minimum financial information, such as your income, debts and assets.
Pre-approval: A pre-approval is a more concrete picture of how much you may be able to borrow. A pre-approval requires you to actually fill out a mortgage application and supply your chosen lender with much more in-depth financial information than when getting pre-qualified. Documents you should have in order for getting pre-approved are:
- Proof of Income: W-2 Statements, paystubs, any other additional documents.
- Proof of Assets: Bank Statements, investment account statements
- Credit History: You’ll have to provide your credit information, including open lines of credit, loans, and more.
- Employment Verification: Pay stubs, employer info for salary employment status, etc.
- Miscellaneous Documentation: Be ready to provide things like your Social Security Number and driver’s license or whatever else your lender may require for you to get pre-approved.
Getting pre-approved can seem like an endless stream of paperwork, but it will undoubtedly place you in the fast lane to homeownership. This way, when you spot a home or condo you can’t live without, you will know right away if it could be a reality or will stay a pipedream.
Another important factor to consider is your readiness. Are you fully prepared for homeownership? This may seem like a backward question if you’ve already been pre-qualified or pre-approved, but completing that first step doesn’t mean you have to dive immediately into purchasing a home. When you buy a home, some things to consider may be planning your family, your future in your career, if you’re going to / going back to school, immediate family care, etc.
Plan to bunker down in your first home for at least five years, so if you fear having to move to take care of an ailing parent or want to seek career opportunities elsewhere, think about those implications. If some serious moving around is in your near future, maybe homeownership isn’t right for you at this time.
Also take into account the types of repairs and maintenance that your first home may require. If you’re in the market for a fixer-upper, remember that home repairs can quickly blow your budget. Even one significant project—new carpet, new shingles, a few new windows—could put you under financial stress. What’s more, depending on the type of home you invest in, insurance could be more expensive than your initially expect. First-time homeowners might not even think about home insurance since it isn’t a factor they’ve had to think of before.
Once you feel comfortable with all the unknowns of officially owning your very first digs, then start your search!
There are an incredible number of factors to consider when checking out where you might live soon—neighborhood, schools, parks, walk scores, location, proximity to work, etc. Each of these factors will play a role in how much your home may cost and how much your home insurance will cost. When searching for a home within your budget, check out what comparable homes are selling for in the neighborhoods you want to live in.
One of the best things you can do is your homework. Check out what each neighborhood has to offer. Even when you look at different homes within the same city, each neighborhood can hold a different personality or characteristics. One might be littered with parks while the neighborhood over is full of theaters and nightlife—it’s all about who you are and what you can imagine yourself doing outside of your home. Want to be a homebody? Check out the quiet residential neighborhood. Want to go to local concerts? Well, there’s definitely a neighborhood for that, too.
Once you find the home you love, don’t wait. You’ve done the hard part—now it’s time to make an offer that you know you (and your bank account) are comfortable with.
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Our must-not-do list is pretty short but important. Check it over and make sure you don’t end up committing one of these faux pas for first-timers.
When you apply for a mortgage, your lender will be scouring your credit to get an idea of your financial stability and responsibility. Buying another big-ticket item on credit, such as a new car, boat or home theater system, could indicate to the lender that you’re going too far, too fast. If you seem to be borrowing more than you can afford, you could be seen as a risk. Withhold your large purchase until after you’ve settled in to your home. That means return that house-load of new furniture you bought before closing on your home—save it for after.
While putting more money down for your down payment may mean cheaper mortgage payments in the future, draining your savings to do so isn’t the best idea. If you have money left after paying what’s required for your down payment, consider saving it for a rainy day. You never know when you’ll need it, and if you do, you don’t want to feel strained for not having even a small financial safety net.
Fannie Mae strongly recommends not putting more than 28% of your income toward your monthly mortgage payment. Any more than that and you risk becoming house-poor, which could put you under severe financial stress and could put you at risk of eventually losing your home.
Roost is made up of hardworking down-to-earth Minnesotans who can guide you into your first home in the easiest way possible. From our very first conversation, you’ll already feel the worries wicking away, and you’ll be able to see yourself settling into your first home more than ever. Our experience and insider know-how makes us well-versed in finding first-time homebuyers exactly what they need.
What are you waiting for? Come Roost with us.
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