How to Buy Your First Home in 2010
By Brandon Cornett | 9/25/09
© 2011, All rights reserved
So, you’re thinking about buying your first place next year in 2010, and you’re wondering what steps you need to take here in the present. If so, you’ve come to the right place. In this lesson, you’ll learn how to buy your first home the right way, by starting with your budget and moving forward from there.
This article assumes that you have already weighed the pros and cons of home ownership versus renting, and you’ve decided to buy a house. If that’s the case, let’s jump right in. Here’s how to buy a house smartly…
Buying Your First Home – By the Numbers
- Establish your budget early on. This is your job, not the lender’s job. You need to compare your monthly income to your expenses, and come up with a monthly spending limit. You should know how much you can afford before you start dealing with lenders.
Start saving your cash early on. Now would be a good time to start. You’ll need some money for a down payment, and you’ll also need to bring a check to the closing. In 2010, your down payment might be anywhere from 3.5% (for FHA loans) to 10% or more (for traditional mortgage loans).- Get copies of all three of your credit reports, as well as your credit scores. Did you know they are two different things? If not, you should check out the Credit FAQ section of our website to brush up on this subject.
- If your score is below 650, you have some work to do. You’ll want to push it above that range, to increase your chances of getting a mortgage loan in 2010. If you can get it above 750, even better — you’ll probably qualify for the lender’s best rates with a score in that range.
- If you need to improve your credit score, you should start as soon as possible. There is no mystery about how to do this, but it does take some time. So start early. Here’s a related article on how to increase your score as quickly as possible. Having good credit will make it much easier to buy your first home, so find out where you stand today!
Schedule an appointment with a lender to get pre-approved for a mortgage loan. The lender will take a look at your credit score (see above), your income versus debt, and other aspects of your finances. Based on this review, they will tell you how much they are willing to lend you. It doesn’t guarantee you’ll get that much, when the time comes to actually apply for the loan. But it does give you a good idea of what you can get.- Find a real estate agent to help you through the process. Your agent will explain how to buy your first home in step-by-step fashion, as I’m doing here. But more importantly, he or she will personally guide you through each of those steps.
- Now comes the fun part. House hunting! If you follow the steps I’ve recommended up to this point, you’ll be well prepared to enter the 2010 real estate market. So get out there and look at houses. Give your agent a list of things you want from your first home (size, location, price, number of rooms, etc.) so he or she can help you find it. Use the newspaper. Use the Internet. Drive through your preferred neighborhoods and look for yard signs.
- When you find a home you want to buy, you need to evaluate the seller’s asking price. Don’t just assume it’s priced fairly — many sellers overprice their homes due to their emotional attachment. You should make an offer based on recent sales data. Use the Internet to research the prices of homes sold in the area. Have your agent show you 2010 data on comparable sales. The last thing you want to do is spend too much for your first home, because you’ll have negative equity from the start.
Get the home inspected by a professional inspector. It only costs around $300 – $400, and it will alert you to any structural or systemic problems within the house (a bad roof, faulty wiring, leaky pipes, etc.). You should always get an inspection, even if it’s a new house.
After this, you are ready for the closing process. That’s when all of the paperwork is finalized, and all funds are distributed to the appropriate parties. It’s also when you get the keys to your new place!
So there you have it — how to buy your first home in ten easy steps. Buying a house is not as complicated as many people think. If you follow the steps I’ve outlined above, and do plenty of homework along the way, you’ll be in great shape when it comes time to buy your first place. Good luck!