Buying your first home is an exciting milestone, but it can also feel overwhelming. The good news is that with the right financial footing, you can turn your dream of homeownership into a reality. Let’s take a look at some practical tips to help you confidently navigate the homebuying process.
As you embark on your homebuying journey, remember that careful planning and thoughtful decision-making can help make the process smoother and less stressful. Each step you take, no matter how small, brings you one step closer to unlocking the door to your dream home. And don’t forget that if you’re buying a home in Connecticut, Maine, New Hampshire, or Florida, our dedicated mortgage experts are ready and waiting to assist with your home financing.
- Check Your Credit Report. Before applying for a mortgage, it's essential to review your credit report and understand your credit score. While there are some special mortgage products out there with relaxed credit requirements, generally you’ll need a credit score of at least 620 to qualify for a home loan. You can obtain free copies of your credit report from Equifax, Experian, and TransUnion through AnnualCreditReport.com. While your credit reports won’t typically include your credit score, they will contain the information needed for you to gauge if your credit needs improving. Check your reports for any information that could negatively impact your credit. This includes missed or late payments, high credit utilization, or lack of sufficient credit history. To gain insight into your actual score, see if your bank or credit card provider offers a free credit monitoring service. These services, like Bank5 Connect’s credit monitoring platform, typically let you view your credit score and offer personalized score improvement tips.
- Save for a Down Payment. While there are some mortgage programs out there that allow you to purchase a home without a down payment, or with a reduced down payment, most conventional home loans require you to put down at least 20% of the home’s purchase price. Having a substantial down payment will not only reduce your monthly mortgage bill, but it will typically eliminate the need for private mortgage insurance (PMI). Consider opening a dedicated bank account to save for your down payment so you’re not tempted to withdraw funds for other purposes. A high-interest savings account is a great option because it allows you to earn more on your deposited funds. The faster you can reach your savings goals, the faster you can get into the home of your dreams.
- Understand Closing Costs. Closing costs are an often overlooked homebuying expense. These fees are paid when you close on your new home, and they can range anywhere from 2% to 5% of the home’s purchase price. Closing costs can include loan origination fees, appraisal fees, title insurance, escrow fees, and home inspection fees. Use an online closing cost calculator to get an idea of what you might pay.
- Plan for Property Taxes and Homeowners Insurance. Many first-time homebuyers fail to consider that their monthly mortgage bill will likely include payments for their property taxes and homeowners insurance. These fees are commonly collected by your mortgage servicer and placed in an escrow account until they are paid out on your behalf. Even if your mortgage doesn’t require an escrow account, you’ll still be responsible for paying your property taxes and homeowners insurance. For this reason, it’s important not to overlook these expenses.
- Prepare for Home Maintenance and Repairs. Owning a home comes with responsibilities, including upkeep and unexpected repairs. Start to save for routine maintenance and unplanned expenses like leaks or broken appliances. Establishing an emergency fund for your home can help you avoid financial strain and keep your home in good condition. Experts suggest saving 1% to 3% of your home's value for routine and emergency maintenance. A high-interest savings account is worth considering, as the additional interest you’ll earn can help your savings grow more rapidly.
- Factor in Moving Expenses. Don't forget the logistical costs of moving. Will you be hiring movers? Renting a moving truck? Purchasing packing supplies? Moving expenses can add up quickly, especially if your move is long distance. Consider creating a moving checklist and budget for your move using online resources such as a moving cost calculator.
- Obtain a Mortgage Pre-Approval. Once your finances are in order, getting pre-approved for a mortgage is the next critical step. A mortgage pre-approval not only gives you a clear understanding of how much home you can afford, but having one in-hand also signals to sellers that you’re a serious buyer. A pre-approval shows that you have the financial backing to buy the home, which can give you a necessary edge in today’s competitive real estate market. As a first-time buyer, it’s a good idea to work directly with a trusted mortgage expert. They can help guide you through the mortgage process, explain what documents you’ll need, and set realistic timelines. If you’re a homebuyer in Connecticut, Maine, New Hampshire, or Florida, consider working with a Bank5 Connect lender for your mortgage. They’ll assist you every step of the way, completely online.
As you embark on your homebuying journey, remember that careful planning and thoughtful decision-making can help make the process smoother and less stressful. Each step you take, no matter how small, brings you one step closer to unlocking the door to your dream home. And don’t forget that if you’re buying a home in Connecticut, Maine, New Hampshire, or Florida, our dedicated mortgage experts are ready and waiting to assist with your home financing.