Thursday, May 19, 2022 / by Alona Sporcich
Are you thinking of buying a home but not sure where to start? Yes, there are a lot of details to work out during the home-buying process but it doesn't have to be overwhelming. Here are a few steps to get you started.
Step 1: Put money aside for the purchase.
As you are probably aware, lenders will want a down payment on the home you choose to buy. You should start saving money prior to even shopping for your home. The best way to do this is direct depositing a portion of your paycheck into a dedicated savings account. Try to avoid spending any money out of that account for anything else other than your home. You should also save for the closing costs associated with the property purchase in addition to the down payment. While you're saving, check into programs that can assist you with down payments and other fees. This could help you get ahead on your first payment when it comes due.
Step 2: Make certain you have a good credit score.
The next stage in preparation for your home purchase is to improve your credit score as much as possible. Your credit score will determine whether or not you are approved for a loan. To increase the score, try to use various types of credit accounts. Make all your payments on any credit cards, loans, and utilities on time. Avoid maxing out credit resources and paying off accounts.
Step 3: Gather Important Documents.
There are many documents to obtain when preparing to apply for a house loan. Pay stubs, tax returns, bank statements (about six to twelve months' worth), and other financial documents are a few of the items you will need.
Step 4: Determine What You Can Afford.
When looking for a home loan, you should first figure out how much you can afford. Simply calculate your debt-to-income ratio, which is the percentage of your monthly income that is spent on debt payments before any deductions. It's preferable not to spend more than 40% of your monthly gross income on debt.
We know the process can feel like a lot but you are not alone. Contact our team at FLR where we can walk you through the process and give you advice on what you will need to get started.