Starting your homebuying journey is an exciting time but can also be nerve racking. To make the process easier and less stressful, it is helpful to know some key information about yourself that will impact your ability to qualify and guide you in your home search. Here are a few things to know before you buy a house:
What to Know Before You Buy
1. Credit score
Your credit score can be a determining factor in your ability to get a mortgage and will impact what interest rates are available to you. Learning your credit score will give you an idea of what loan products you qualify for. Higher credit scores qualify for lower interest rates.
2. How much house you can afford
Your debt-to-income (DTI) ratio will be a huge factor in determining how much house you can afford. Your DTI measures how much of your gross monthly income is going towards your monthly debt obligations, including your housing expense. Keeping your DTI low will enable you to qualify for a higher purchase price.
3. Down payment options
Down payment is the cash you pay at closing toward the home purchase. On a conventional mortgage, the minimum down payment for a first-time home buyer is 3%.
4. How much can you borrow
Your first step in the homebuying process should be to get preapproved for a mortgage. A preapproval letter will let you know how much you qualify to borrow and your appropriate price range when you start looking at homes.
5. Your local real estate market
You can easily browse listing websites to get a feel for what homes are going for in your area, the inventory on market, etc. Getting a feel for this ahead of time can help you set expectations for what is available in your area and how much competition you may face when making offers.
6. Where you want to live
Every city has distinct areas and neighborhoods that have their own unique characteristics. It is important to weigh what factors are most important to you, for example: proximity to work, good schools, proximity to restaurants and shopping. Determining what is most important to you and what areas would accommodate that will help you narrow down your home search.
7. Type of home you want
Condos, townhomes, single family home—there are all different kinds of homes available on the market. Considering which one best suits your budget and lifestyle can be another great way to narrow down your search.