Purchasing your first home can be a complex process, but keeping yourself organized is your key to success.
Before shopping for homes and figuring out which neighborhoods you like best, you’ll need to figure out what you can afford. You will also need to prepare all your financial documents to apply for a loan.
Can you afford it?
When purchasing a home, it’s important to remember that you won’t be paying just the home loan. A lot of communities today also have a Home Owner’s Association, also known as an HOA. If you pick a community that has one, then you’ll pay a monthly, quarterly, or yearly fee to the association for things like community pool maintenance or lawn care. This will differ depending on what home you choose.
As a new homeowner, you will also be paying property taxes and utilities. Your real estate agent can get you an estimate of both of these based on neighborhoods and size of the homes you are looking at. Here is a more in depth look at budgeting for your first home.
When applying for a new home loan, most financial institutions require the same basic documents. If you are applying for a loan jointly with another person, then you will need all the following documentation for each applicant:
- 2 (most recent) years of tax returns
- 2 (most recent) pay stubs
- 6 months of bank statements for checking and savings accounts
- current statement for any open credit cards
- current statement of any current debt (car loans, student loans, etc.)
You will likely have to fill out a loan application and sign an authorization for the institution to pull your credit score. The bank will analyze all of your documentation and provide you with an approval dollar amount. You can also use financial calculators (like this one, or this one) to give you an idea of what you’ll be able to afford.
Don’t forget to shop around for the best rates. Some banks give discounts on rates for having several products, signing up for auto-payments, etc. Make sure to ask questions and explore all your options.
Happy house hunting!!
Are you shopping for a home loan for the first time? Do you have any other tips for those who are buying their first home? Let us know in the comments.