As interest rates begin to tick down, you might be considering saving money to buy a home this year. Buying a home is a significant milestone and one of the most substantial investments an individual can make.
Preparing to buy a home doesn’t just involve deciding on a location or scrolling through images of homes online. You’ll need to dive deep into your finances and prioritize the home features you want most. Here are a few steps to help you get started.
Determine your budget
Figuring out what you can afford to spend on a monthly mortgage payment might seem like an obvious place to start, but it’s an important one. Experts say your total monthly home expenses should be at most one-third of your gross monthly income.
Unlike renting, owning a home involves additional costs such as property taxes, home insurance and interest. Carefully consider these factors when setting your budget.
Check your credit score
Unless you’re an all-cash buyer, financing will likely be part of your home purchase journey. Assessing your credit score is another important first step, as it dictates the financing options available to you.
Lenders rely on credit scores to evaluate a borrower’s payment history and gauge the likelihood of repaying the mortgage. Your credit score will also impact your mortgage terms. The higher the score, the more financing options and lower interest rates will be available.
Create must-haves checklist
As a first-time homebuyer, outlining your non-negotiables is essential. Do you need flexible space for a play area or a minimum number of bathrooms? What features are you willing to compromise on to ensure your home fits your budget?
Having a general idea of the size, location and amenities you want most in your home will help you ensure you choose a home that best fits both your lifestyle and your wallet.
Shop for a mortgage
Mortgage rates vary among lenders, so doing your homework is important. Shop around to find the lowest rate, or work with a mortgage lender to help you find all the loan options available.
Several types of mortgages are available, including Federal Housing Administration (FHA), conventional, adjustable rate and fixed rate. You’ll need to learn more about them to determine which option works best.
Buying a home is a considerable investment in time and money. For advice from hundreds of local home industry leaders ranging from builders to lenders, join us at the upcoming Tri-State Home Show – sponsored by EPB Fiber Optics and J103 Radio – at the Chattanooga Trade Center Feb. 16-18.