If you have decided that buying a home is right for you, then you might be wondering how you can get started. If you are a first-time homebuyer, you will have a lot of questions. It is only normal to feel scared about making mistakes, but you also have to learn the basics of the home buying process. Read on if you want to have a glimpse of the basic processes involved in buying a house.
Step 1: Set A Budget
Before you start shopping for a home, you must first set a budget. When we talk about "budget", we mean: "housing budget". This is the amount you are willing and can afford to pay for a mortgage every month. To determine what you can afford, you can consider using online mortgage calculators, or you can do it manually. The amount you arrive at, after subtracting your expenses, is the amount you can afford to spend on monthly mortgage payment.
Step 2: Check Your Credit Score And Get Pre-Approved
The next important step is to check your credit score and get pre-approved for a loan. You have to understand that your credit score can have a significant impact on your chances of getting a loan. This is because a number of lenders are doing what they can to lower their risks. The best method for them to avoid risks is to evaluate the borrower's credit score.
The one that is checked by mortgage lenders is your FICO credit score. The FICO score is computed based on the information found in your credit reports. Here are some things you need to review:
- Make sure that your credit reports are accurate. Your credit report must be free from errors and inaccuracies.
- Another tip is to check your FICO credit score to be updated on where you stand. The scoring range is between 300 and 850. If you have a higher score, it will be more advantageous for you.
The next thing you need to do is get pre-approved for a mortgage loan. The pre-approval process may take some time, but it is best to take the time and get pre-approved first before shopping for a home. Pre-approval is when you talk to your lender about two things: Whether you are qualified for a loan; and how much the lender can lend you.
Step 3: Start Shopping For A House
For most homebuyers, this is the most exciting stage of the home buying process. This is when you start shopping for neighborhoods and houses. If you have followed the steps before arriving to this stage, you will have important pieces of information which will help you in finding the right property. You will have your budget, as well as the pre-approval amount of your lender. With this, you can confidently shop for houses that will fall within both of amounts; thus, you will be able to narrow down your choices.