What is the first step in the homebuying process?

The home buying process is usually a huge life event for most people. Although it can be very exciting, it can also be overwhelming. It is important that buyers surround themselves with the right people and slowly build a team to help with the process. This includes real estate agents, lenders, lawyers, inspectors, and more. But, before all that, here are 3 things first-time home buyers should first consider.

WHAT ARE YOU PRE-APPROVED FOR?

It is important to find out what loan amount you are pre-approved for even before searching for properties. For example, if you are pre-approved by your lender for a purchase price of $300,000, and you want to live in a neighborhood full of multi-million dollar homes, then you may need to think again. It is important to connect with the right mortgage loan officer (MLO) and have discussions on what they can pre-approve you for and what types of loan options are available that would best suit your financial situation. Once you have your pre-approval, then you can move on to the next step.

WHAT IS YOUR BUDGET?

Once you have your pre-approval, you can come up with a budget. Just because you qualify for a million dollar home, doesn’t mean that you may necessarily want to buy and live in a million dollar home. When calculating your budget, you’ll want to consider your down payment, closing costs, and renovation costs if necessary. You will also want to determine what you want your monthly payment to be, which includes your mortgage, taxes, and insurance. Keep in mind, if you put less than 20% down, you’ll also have to pay for private mortgage insurance (PMI).

Once you have your budget down, then move onto the next step.

WHAT AREA AND PROPERTY TYPE DO YOU WANT TO LIVE IN?

Now that you have your pre-approval and budget, you’ll want to pick an area and property type that best suits your needs. Consider what qualities of a neighborhood and home are important to you. What are you willing to sacrifice and what are your non-negotiables?

For example, let’s say you’re pre-approved for a $300,000 home and you want to live in a single family home in a nice suburb that has single family homes worth at least $500,000. Well, in that case, are you willing to live in a townhouse instead? If not, then would you be willing to move to a neighboring suburb where single family homes are a little cheaper? Or, maybe you can find a single family home that’s a little smaller in that particular suburb.

The goal here is to find the property type and area that best fits your pre-approval and budget.

FINAL REMARKS

In summary, make sure to get pre-approved, come up with a budget, and determine an area and property type you want to live in. Keep in mind, a great MLO and real estate agent can guide you through the beginning stages of the home buying process so leverage them to make your life easier! Please reach out if you need a realtor and MLO referral!