For many young people in their early 20s, 30s, or even kids fresh out of high school, buying a home is so foreign. Your high school teachers and college professors probably never talked about building credit or saving for a down payment. I bet they also never explained the difference between FHA, VA, and conventional loans? All of this can be so confusing when navigating real estate, however, I hope this guide can give you an idea of where to start, some commonly used vocab, and how to get ready for the biggest investment of your life.
How do I start the processes of buying a home?
The number 1 obstacle in buying a home is always financing. If you cannot afford a home there is simply no way around it, you must be able to provide a payment in some way. There are two main payment options, cash or financing through a loan. Most first time home buyers need some form of a loan, this is where a lender comes in.
Step 1: Find a lender that is patient and is willing to explain every detail.
Finding a lender to help finance your home is crucial. This in itself can feel overwhelming, so never hesitate to reach out to me for some referrals. I have worked with many lenders, and by now I know who crushes it, and who is not-so-great!
Once you have chosen a lender they will likely begin discussing pre-approval. Pre-approval will give you an idea of how much money you can receive from the bank to buy a home.
In many cases, though you will not receive pre-approval right away. This is often because you don’t have enough credit built up, enough money down, or insufficient work history. This is always why I put finding a lender as our number 1 priority because they can help with all of this!
Step 2: Get pre-approved/ create a plan for pre-approval.
Once you have talked with your lender about your current work situation, income, and cash down they will be able to give you tips to get pre-approved. It is very rare that everything works out on the first try, so don’t be discouraged if your lender needs you to adjust. However, I understand you want to be as prepared as possible, so below are some tips to help boost your odds of being pre-approved on the first try!
- Find and maintain a well-paying job
- Start saving for your down payment (Cash needed for loan) aim for 5-25% of the desired purchase price.
- Build your credit using low-interest debts. Credit is very tricky but plays a huge role in your loan. Talk to your lender and build a specific strategy to help build good credit quickly.
Step 3: Find a realtor who is patient and understands your needs.
A realtor is someone who has your back through the entire process of buying a home. You want a realtor you can trust, someone who is dedicated and patient. A realtor will make your life 1million times easier! They help point you in the right direction, get all documents signed, set-up closings, etc…
When you meet up with your realtor talk to them about your needs and wants in a home. Once you establish this you can find homes with these needs and find a price range to aim for. You may need to adjust this and narrow down your “wants”. Most people’s first homes are fairly simple, but it all depends again on your pre-approval!
Step 4: Begin the SEARCH!
Once you have created a team of both your lender and your realtor you can start looking for a home! This is by far the most exciting part of your search. This is the part where you can (somewhat) relax, and enjoy the search. Your realtor and lender will now help guide you through all the documents, issues, and options.