Four "First Steps" for Homebuyers
Mortgage rates are at 50-year lows – the 30-year fixed-rate mortgage averaged 3.95 percent at the close of 2011 – making homeownership more affordable than ever for families with a stable income and good credit. But before you begin house hunting in earnest, it's important that you get the facts about buying a home in today's market. Because whether you're shopping for your first home or your third, there are some "rules of the road" you'll need to understand.
Here are four steps you should take as soon as you start thinking seriously about buying a home:
- Find out your current credit history and score. You don't want any surprises down the road. If you have no credit history, or have had credit problems in the past, there are steps you can take to build, improve, and maintain strong credit. Contact a HUD-approved housing counselor for free advice.
- Start gathering all of your documentation. Responsible lenders today will want documentation verifying your income (W-2 forms, tax returns, employment records), credit history, and assets (such as bank statements to verify your savings).
- Consult with your lender to review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for. One important question you'll need to answer is whether you're better off with a fixed-rate mortgage – where you lock in the interest rate for the life of the loan – or an adjustable rate mortgage in which the interest rate changes. While fixed-rate mortgages are by far the most popular choice, you need to know your options.
- Talk to your lender about applying for a mortgage and getting a pre-approval letter. This letter provides an estimate of what you might be able to borrow – provided your financial status doesn't change – and demonstrates to home sellers that you're a serious buyer.
Today's market continues to evolve, but all of the tried-and-true homebuying rules still apply. So do your research, reach out to the professionals, stick to your budget, and be sure you're ready to take on the financial responsibilities of being a homeowner. If you do all that, this can be a very good time to buy a home.
Have a comment or question about this post? Email us to let us know what's on your mind.