If one of your New Year’s resolutions for 2018 is to purchase a home, or to save for a down payment and related costs, Freddie Mac offers the following steps to help get you started.
Determine how much you can afford
To get a very rough estimate of your affordable home price range, multiply your annual gross income by 2.5. You’ll also need to consider the down payment and closing costs, monthly current and future expenditures, and a financial cushion for unexpected emergencies.
Get Pre-approved
If you’re serious about buying a home, reach out to your lender to get pre-approved. Your lender will evaluate four things to determine how much money you can borrow including your current and future capacity to make your payments; the capital or cash reserves you have on hand that can be sold quickly for cash; the home, or type of home, that you’d like to purchase; and your history of paying bills and other debts on time. Having a pre-approval letter in hand allows you to house hunt with greater confidence and alerts sellers that you’re a serious buyer.
Save and stay focused.
Work with your lender to develop a responsible, yet reasonable, savings plan. Stick to this plan and keep your end goal in mind. Identify your must-have home attributes and take some time to answer the following questions to narrow your home search:
• Where do you want to live and how far are you willing to drive to work and/or schools?
• How many bedrooms and bathrooms do you need?
• Do you need a garage or perhaps a backyard?
Does the home need to be move-in ready?
• What qualities would make a house a deal breaker without even looking?
Get educated
Getting educated on the home-buying process is a must and will provide a much better experience. Be sure to earn more about:
• The important role of mortgage rates.
• Which mortgage product is best for you.
• The importance of credit and how you can improve it.
• Your down payment options.
• How to assemble your homebuying team.
• The financial obligations of homeownership.
