Generally, you can
afford a home equal in value to between two and three times your gross income.
2. Develop your home
wish list.
Then, prioritize the
features on your list.
3. Select where you
want to live.
Compile a list of
three or four neighborhoods you’d like to live in, taking into account items
such as schools, recreational facilities, area expansion plans, and safety.
4. Start saving.
Do you have enough money saved to qualify for a mortgage and
cover your down payment? Ideally, you should have 20 percent of the purchase
price saved as a down payment. Also, don’t forget to factor in closing costs.
Closing costs — including taxes, attorney’s fee, and transfer fees — average
between 2 and 7 percent of the home price.
5. Get your credit
in order.
Obtain a copy of your
credit report to make sure it is accurate and to correct any errors
immediately. A credit report provides a history of your credit, bad debts, and
any late payments.
6. Determine your
mortgage qualifications.
How large of
mortgage do you qualify for? Also, explore different loan options — such as
30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.
7. Get pre-approved.
Organize all the documentation a lender will need to
pre-approve you for a loan. You might need W-2 forms, copies of at least one
pay stub, account numbers, and copies of two to four months of bank or credit
union statements.
8. Weigh other
sources of help with a down payment.
Do you qualify for any special mortgage or down payment assistance programs?
Check with your state and local government on down payment assistance programs
for first-time buyers. Or, if you have an IRA account, you can use the money you’ve
saved to buy your fist home without paying a penalty for early withdrawal.
9. Calculate the
costs of home ownership.
This should
include property taxes, insurance, maintenance and utilities, and association
fees, if applicable.
Find an experienced REALTOR® who can help guide you
through the process.
Reprinted from REALTOR® Magazine (RealtorMag.Realtor.org) with permission of the
NATIONAL ASSOCIATION OF REALTORS®. Copyright 2008. All rights reserved.