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If you're purchasing your first home, it's common for the home buying process to feel overwhelming. Not only do you need to find a home that you love, but you need to procure financing to purchase your new home. To decrease the stress associated with buying your first home, follow these important tips.
1. Gather Your Down Payment Ahead of Time
To purchase a home, you'll likely need a down payment. While not every mortgage program requires you to have a down payment, most do.
Usually, the larger your down payment, the lower your interest rate. It's possible to purchase a home with a downpayment as low as 3.5 percent of the purchase price, but other loan programs require a down payment of 5, 10, or even 20 percent of the home's price.
Don't wait until you find a home that you adore to start gathering your down payment. Instead, make this step one of the first things you do in the home buying process. Though you can fund your down payment with your own cash, there may be programs that offer first-time home buyer loans in your area that can help you with your down payment.
Another option is to tap your retirement accounts for a loan or withdrawal to assist with the purchase of your first home. If you're receiving gifted money to assist with your down payment, make sure to procure a letter that specifically states the money is a gift rather than a loan.
2. Locate Your Financial Documents
When you apply for a mortgage, your bank will ask for a lot of documents to get an accurate depiction of your finances. Be prepared to supply the following items:
See if your lender requires paper copies or if you can submit these items electronically. If you can't find a financial document, take steps now to locate it or request another copy. You don't want a missing document to delay the purchase of your new home.
3. Research Potential Areas You Want to Live In
One mistake that some first-time homebuyers maybe is getting overly focused on the type of home that they want. It's equally important to consider what city or neighborhood you want to live in, as the location of a home can greatly impact the price.
When deciding what areas you like, take into account commute times, the school system for the neighborhood, and the general atmosphere of the community. Make sure the area is a good fit for your immediate and future needs.
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