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Tips for First-Time Homebuyers
Are you a first-time homebuyer eager to get into the market? Here are 10 steps to help you decide whether you’re ready to take the plunge.
1. Examine your credit. Blemished credit, or the inability to make a down payment, can hurt your homeownership plans. That’s why it pays to look at your creditworthiness early in the home buying process. Ask any CBT banker to assist you. Get your free annual credit report and comb through it for errors and unresolved issues. If you find mistakes, contact the credit reporting bureau to make sure they are corrected. Any CBT banker can assist you.
2. Get your documents together. Collect pay stubs, bank account statements, W-2s, tax returns for the last two years, statements from current loans and credit lines, and names and addresses of your landlords for the past two years. Have them ready to show to the CBT lender that is assisting you. This process will be made easier if you start early.
3. Get preapproved. Getting preapproved for a mortgage helps you bargain from a position of strength when you are house hunting. Ask any CBT banker to assist you.
4. Find a realtor that will represent you, and just you. You need an advocate to help you negotiate the sales contract on your new home that represents only you.
5. Get your realtor to check the selling prices of comparable homes close to the home you choose. Do a quick search of actual multiple listing service, or MLS. Also check homes in your area on a number of websites, such as Zillow.
6. Use a mortgage calculator to get an idea of what your monthly mortgage payments would be if you bought a home today, with a reasonable down payment included. Ask us to assist you with this calculation.
7. Find out what your total monthly housing cost would be, including taxes and homeowner’s insurance. Your realtor or CBT banker can assist you with this calculation.
8. Find out how much you’ll likely pay in closing costs. The upfront cost when choosing your home shouldn’t be overlooked. Closing costs include fees charged by the lender, title and settlement fees, taxes and prepaid items such as homeowner’s insurance or homeowner’s association fees. Again, your realtor or your CBT banker can assist you with this calculation.
9. Look at your budget and determine how a house fits into it. Most lenders suggest that buyers spend no more than 30 percent of their income on housing costs. Go much past 30 percent and you risk becoming house poor. Any CBT banker can assist you with this calculation. How much other debt you have is the key factor.
10. Talk to your individual realtor about the real estate climate in the neighborhood that you are looking at buying into. Is it an area where values are increasing? Remember to look at the long term picture. While buying a house is a great way to build wealth, maintaining your home can be labor-intensive and expensive. When unexpected costs for new appliances, roof repairs and plumbing problems crop up, there’s no landlord to turn to, and these costs can quickly drain your bank account. This is fine, so long as you plan for these inevitable events.