Is there anything more stressful than buying your first home?
But surely spending six figures – much of it borrowed – has to rank in the top five on anyone’s anxiety list. Buying your first place may not be stress-free, but it shouldn’t be a white-knuckle experience either, if you’re prepared. Here’s how to make it easier.
Define your dream
The key to finding a home is being realistically optimistic. Wanting a five-bedroom, four-bath, exquisitely restored Victorian on the best block in town may be realistic for some buyers, but take a hard look at your budget before deciding whether it’s possible for you. Make a list of your deal-makers and deal-breakers and figure out how to make them fit into your budget.
Do you need to be in a good school district? Will just a driveway do, or do you also need a garage? How important is that third bedroom? Are you willing to sacrifice space for location? Deciding what you need will save you time and aggravation when it comes to serious shopping.
Fatten up your credit
Check your credit history and credit score before applying for a mortgage. If there are any errors on your credit reports, get them fixed. The higher your FICO score (an excellent score generally ranges from 720 to 850), the better the interest rate you’re going to qualify for on a mortgage.
If your credit score is low, start paying down your debt (as you save for your down payment), which will punch up your score. A percentage point or two added to your interest rate may not seem like much now, but over the life of your mortgage, a lower rate could save you thousands of dollars.
Getting preapproved for your mortgage will streamline the process of buying a home because you’ll be able to show sellers and their agents a letter of commitment, confirming that you are in a position to purchase their home. If it comes down to accepting an offer between a preapproved buyer or one who is not, why would the sellers take chances?
Going through the preapproval process not only helps sellers take you more seriously, but it’ll also help you understand how much house you can afford. Once you see all the figures broken down into monthly mortgage payment, taxes and other fees, you’ll have an idea just how high you can go. You can also discuss the terms of your mortgage: Do you want a fixed-rate or an adjustable-rate mortgage? Are you looking at a 30-year or 15-year commitment?
Preapproval isn’t as difficult as getting the final mortgage, but it does mean gathering a giant stack of paperwork for the lender that will examine your financial history. Mortgage lenders such as Community 1st Credit Union can provide lists of exactly what you’ll need: pay stubs, tax returns and more. It may feel invasive, but would you lend you several hundred thousand dollars on a handshake and a smile? Probably not.
Prepare to settle in
Even if you’re able to pay with cash, buying a home is always going to be a little stressful. But by breaking it down into small, manageable steps, you can make the process a less overwhelming. The reward will be all that much sweeter after you’ve filed the paperwork, written all the checks and are able to unlock the door to your new home.
Judy McGuire, NerdWallet
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