1. Decide what you can
afford.
Generally, you can afford a home equal in value to
between two and three times your gross income.
2. Develop your home wish list. Then, prioritize
the features on your list.
3. Select where you want to live. Compile a list
of three or four neighborhoods you’d like to live in,
taking into account items such as schools, recreational
facilities, area expansion plans, and safety.
4. Start saving. Do you have enough money saved
to qualify for a mortgage and cover your down payment?
Ideally, you should have 20 percent of the purchase
price saved as a down payment. Also, don’t forget to
factor in closing costs. Closing costs — including
taxes, attorney’s fee, and transfer fees — average
between 2 and 7 percent of the home price.
5. Get your credit in order. Obtain a copy of
your credit report to make sure it is accurate and to
correct any errors immediately. A credit report provides
a history of your credit, bad debts, and any late
payments.
6. Determine your mortgage qualifications. How
large of mortgage do you qualify for? Also, explore
different loan options — such as 30-year or 15-year
fixed mortgages or ARMs — and decide what’s best for
you.
7. Get preapproved. Organize all the
documentation a lender will need to preapprove you for a
loan. You might need W-2 forms, copies of at least one
pay stub, account numbers, and copies of two to four
months of bank or credit union statements.
8. Weigh other
sources of help with a down payment. Do you qualify
for any special mortgage or down payment assistance
programs? Check with your state and local government on
down payment assistance programs for first-time buyers.
Or, if you have an IRA account, you can use the money
you’ve saved to buy your fist home without paying a
penalty for early withdrawal.
9. Calculate the
costs of homeownership. This should include property
taxes, insurance, maintenance and utilities, and
association fees, if applicable.
10. Contact a REALTOR®. Find an experienced
REALTOR® who can help guide you through the process.
