On Your Mark…The Starting Line for Buying Your First House
So you’re thinking about buying your first place. Congratulations! Where should you start?
As a recent first-time homebuyer, I want to share my experience with other first-timers and provide tips I found to be quite helpful throughout the homebuying process.
Tip 1: Be prepared
The first thing that I did was go over my expenses. I knew I felt ready to buy a place but could I realistically afford it? I believe this is the single, most important thing that you need to do before anything else. You can use something similar to this monthly expenses worksheet to help you get started. You want to make sure that you don’t stretch yourself too thin. The economy seems to be getting better now but you need to make sure that your job is secure and you should have at least 2 months worth of savings set aside in case something ever did happen.
The next thing that I researched was my credit score. You can obtain this report once a year for free by visiting myfico.com. It is important to know what your credit score is because banks and mortgage lenders will use this to determine if you are a good candidate for a loan. Scores range from 300 to 850. A good place to be is in the 700’s. Your credit score is one of the factors that helps to determine the interest rate you will qualify for. Take the time to read over your credit report and understand it. Fix whatever is incorrect BEFORE seeing a lender so it doesn’t hurt your chances of receiving a loan. To learn more about your credit score check out this article from fiscalgeek.com.
Once you have a handle on this, the next thing on your list is to get pre-qualified from the bank or mortgage lender of your choice. A good place to start is with the bank where you have your accounts already. Know that there is a difference between pre-qualified and pre-approved. When you are pre-qualified, it means that you are in the very initial stages of getting a mortgage. Your overall finances are looked at, including current salary and amount of debt, and you will find out the amount for which you qualify.
Pre-approval is the next step. You have to fill out the mortgage application and, in some cases, pay a fee. A more in-depth look is done into your finances. This is why it is important to know your credit score beforehand so you know where you stand. Most real estate agents require that you are pre-approved before they will take you out to look at any properties. Why? A couple of reasons. One is that you want to be sure that you are looking at the right price range. You don’t want to see a house you love and find out that you can’t afford it. You also want to have a pre-approval in hand so that you are ready to submit an offer on that house you love rather than having to wait. Another reason to be pre-approved is because of all the recent foreclosures. It’s very tedious to go through the loan process (believe me and even more so if you need a co-signer) lenders are very particular about everything.
From my experience, here are a few tips for what to bring when you go to get a loan:
- Recent pay stub(s). If you have worked in more than one job over the past 2 years have pay stubs from all.
- Copies of 2 most recent bank statement(s) and retirement fund statement(s).
- Know your work history for the past 2 years. Lenders want to know you are a steady employee. If you have bounced from job to job, been laid off, or worked in different industries, they will need to know. They want to make sure you are not a risk.
- Copies of tax returns for the past 2 years. They will need all the papers so just bring everything you have.
- Dig out your checkbook (considering many people pay bills online). There may be a fee for processing the application.
- Bring reinforcements, if you can. I had my dad come along with me the first time I met up with the mortgage lender. No matter the amount of research that I did, there were still things that I didn’t know/understand. It was helpful to have someone there who has been through the process before and could help out. Shout out to Dad!
- List of questions/notebook. This is a long, drawn out process. If you have questions or concerns along the way, make sure you ask them and keep notes. Understand everything you are getting into is very important. Remember, this is a huge investment; don’t be afraid to ask questions.
Once you have your finances in check, know your credit score and are pre-approved, what’s next? Find a good real estate agent! How? My suggestion is to talk to people who might have recently moved or are in the process of looking. Word of mouth is usually the best way to go. I happen to know someone who was a realtor so when I decided I wanted to start looking; I contacted Jake who then put me in contact with Beth. And with that said, I suggest contacting Beth Lucht! She is the best realtor hands down. I absolutely loved working with her. She is very organized, up-to-date, professional and an overall pleasure to be around. I feel very lucky to have worked with her. Tell her I sent you. 
This is how I began everything. Scared? So was I. But you really don’t know what you are getting into until you experience it first hand. The fun is only beginning!
Michelle is a recent business school graduate, first time home buyer and lifelong Massachusetts resident. Though she's all Generation Y, we think of her as a modern-day Mary Tyler Moore. She plans to share her experiences as a new home owner, and give us her fresh take on Greater Boston area local events, activities and happenings. She's gonna make it after all!
Hi Joanne Thanks for the comment! I think the important question that any first time home buyer needs to ask is which loan is the best for them. There are a ton of different options out there and every first time home buyer needs to be informed with which loan works best for them. Talking to a mortgage lender at the beginning of the process will help them be better informed. Michelle
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