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5 essential steps for first-time homebuyers

5 essential steps for first-time homebuyers

Charlene Ferreira
BuyersBuyer TipsFirst-time Homebuyer
Buying your first home? From checking your credit to saving for a down payment, these five key steps will help you get financially prepared, improve your chances of approval, and give you an edge in today’s market.

Five key steps for first-time homebuyers to consider when preparing to purchase a home, from assessing their debt, to obtaining preapproval.

If you’re a first-time homebuyer, it’s important to carefully consider all the factors involved in the home-buying process to make sure you’re well-prepared for this major financial commitment. In this blog post, we’ll discuss five essential steps you should take to ensure you’re ready to buy your first home.

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  1. Assess your debt: Lenders will check your debt-to-income ratio (DTI) and the more debt you have, the less you can borrow. Reduce your credit card balances to 30% or less of your available credit and consider paying off or significantly paying down other installment loans.

  2. Check your credit: A better credit score means a lower interest rate, so check your credit score before applying for a mortgage. You can boost your score by paying down credit card debt, increasing credit limits, and disputing errors.

  3. Review your budget: Your budget will change when you buy a home, so remember to plan for additional costs like property taxes, homeowners insurance, maintenance, and emergency repairs. Many lenders require two months of reserves in the bank to cover these costs.

  4. Determine your down payment: The higher your down payment, the lower the risk to a lender, and the less likely you are to pay private mortgage insurance (PMI). Aim to save as much as possible to avoid paying PMI.

  5. Get preapproved: Preapproval tells you how much you can borrow, positions you as a serious buyer, and gives you an advantage in negotiations. It’s best to get preapproved before you start looking for a home.

By following these steps, first-time homebuyers can ensure they are financially prepared for the process of purchasing a home and increase their chances of getting approved for a mortgage with favorable terms.