Step 1: Getting Pre-approved
Knowing your credit history is one of the most important steps to pre-approval. The higher your score, typically the more favorable lending terms you will be able to secure. Sometimes the difference of 20 points on your FICO score can be the difference of tens of thousands of dollars in interest savings over the life of the loan.
In the past, individuals who purchased a new home traditionally had to put down a 20% down payment. This would be equal to 20% of the purchase price of the home. Now, it can be as little as 0.5-3.5% down for FHA , USDA and VA Loans. As a buyer, you also need to keep in mind that closing costs can be a part of the equation. Closing costs vary depending on your individual situation.
Step 2: Calculating the amount of home you can purchase.
Consider your entire budget: how large are your credit card bills? What are your car payments? How much will it cost you to maintain your new place? What kind of tax deduction can you expect from the interest that you will pay on your new home?
Step 3: Determining the most beneficial loan program.
The wide variety of new loan programs has made it easier for home buyers to purchase a new home. However, it can be difficult to decide what mortgage is right for you and your family. The standard 30-year fixed rate mortgage allows predictable payments and allows you the stability and peace of mind your family may be looking for. If you’re planning on moving after a few years, consider an adjustable rate mortgage, which has lower interest in the beginning and keeps your payments lower for the first few years.
Step 4: Locating a new home.
Finding the right realtor can make or break your home buying experience. Make sure you find a person that you feel comfortable with and who will work to find you the right home. Make a list of the things that you want in your dream home such as number of bedrooms, lot size, location, style of home, and the future growth of your family. Then sit down with your realtor and discuss your wishlist.