A beginner’s guide to buying a home



Let’s be honest – providing a home isn’t always easy. In this market where homes are sold like hot potatoes, it might seem like everyone can afford to buy a home, but they are not. Becoming a first home buyer takes time, money, energy, planning, money, and more money.

Even with current low interest rates, providing a home can be a challenge. And it doesn’t help that we live in a seller’s market, where prices continue to rise. So what are you supposed to do? Give up the American dream of a three-bedroom home with a white picket fence? Definitely not.

While it is difficult to afford to buy a house, it is possible. Here’s a step-by-step guide to help you find the keys to your first home:

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Step 1. Know your credit rating

What is your credit rating? If it’s been a long time since your last check, you should take a look at your credit report. Your outcome will determine the financing options for buying a home. For example, how you get a mortgage depends on your credit rating.

According to Equifax, a good credit rating ranges from 739 to 670. A good credit rating is between 669 and 580. A bad credit rating is anything below 579. If you have a poor credit rating, it is unlikely that the lender will approve you for a loan. And if they do, then, most likely, it will be associated with a high interest rate.

The good news is that you can raise your credit score by paying off debt and making payments on time. It’s also a good idea to work with a financial advisor to improve your bottom line.

Step 2. Explore the different loan options

While it can be daunting to be the first home buyer, it has its advantages. Novice home buyers have mortgage options that don’t require a large down payment. For example, if you have a minimum score of 580, you may be allowed to deposit as little as 3.5% of an FHA loan.

There are many programs available for home buyers, so make sure you do your research to find the best one for you.

Step 3. Determine What You Can Afford

To determine which home you can afford, you need to: analyze your debt to income ratio (DTI). Your DTI shows how much money you are investing in debt each month and is relatively easy to calculate.

First, find out our total monthly debts. How much money do you invest in student loans, credit card bills, personal loans, etc. each month? Once you’ve got that number, divide it by your household’s gross income – this will give you your DTI. With this percentage, you can see how much wiggle room you have per month to pay off your mortgage (and all other payments that go towards owning a home).

Lenders also look to DTI when approving the loan to you. The lower your DTI, the higher your chances of getting approved.

Step 4. Save money (and then keep saving)

One of the most important yet challenging parts for newbies is saving money. Regardless of the type of home or loan, you will have to pay myriad expenses to get the keys to your dream home. From the down payment to closing fees, it is important that you have a significant portion of the changes deferred so that you can afford these costs.

In truth, saving money takes time. But once you know how much home you can afford and what type of loan you can get, you can set a goal. And then a budget to help you achieve that goal.


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