Home Mortgage Alliance Corporation (HMAC)

Baby steps are big steps when buying your first home

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Published Date 2/27/2024

Going from renting to buying for the first time? As giddy as it felt to hang your first piece of art in your rental apartment, take that feeling and place it on steroids when it comes to the one you’ll have when you move into your own home.

If the idea of buying a home seems daunting, take heart. Like everything else you do and want to do right, it’s best to have a checklist ready, so you can take it a day, week, or month at a time. Buying a home is a rite of passage not everyone is privileged enough to experience, so savor every moment.

Realtor.com’s Daniel Bortz offers a first-time homebuyer checklist to help remove the pendulous weight from your shoulders when you’re ready to buy. “It’s a big step—and one where it’s wise to know for sure you’ve got all your ducks in a row first,” he says.

While it feels free and easy to begin your search online browsing listings, it’s not all it’s cracked up to be. Why? Because it’s easy to fall in love with homes outside your price range. It costs you nothing to interview one or more real estate agents and choose one who seems to “get” your vibe when it comes to house hunting. It’s best to choose a seasoned professional to guide you through every step of the home-buying process. Free tour guide. Free advice — no strings attached. What could be better?

To find just the right one, scrutinize agent reviews online. Pay close attention to his or her years of experience, the number of homes sold, and the neighborhoods the agent considers to be his or her own backyard. Interview two to three agents before signing a representation agreement with one.

Now it’s time to get thee to a mortgage lender if you haven’t done so already. Your agent may have some recommendations for people with whom they have already done transactions and deem them trustworthy, but the choice of lender is yours and yours alone. Speak with multiple lenders to enable you to fully assess your financing options with no obligation to pick one until you’ve found one that’s right.

The goal here is to acquire that golden “pre-approval” letter. Once you’ve made your choice in loan agents, you’ll need to provide him or her with a checklist of items: bank statements, pay stubs, W-2 forms, 1099 forms, and tax returns. If the lender decides to offer you pre-approval, you’ll receive an estimate of what size loan you would qualify for and approximately what interest rate you’d get. Now you know the parameters for home shopping, financially speaking.

Pre-approvals last for 90 to 120 days; however, so keep your financial picture frozen in time. If your lender feels you can get a better loan if you improve a few things within that financial snapshot after seeing your credit score. Scores 760 or higher are considered primo, nabbing you the most competitive interest rates. Your credit score is calculated based on your debt payment history, debt-to-credit utilization, and length of credit history. Event things like timely utility payments and being on time with your rent will count.

Need a boost? There are ways to improve your score, but it won’t happen overnight. You may need to postpone your house search for a few months while mending your credit.

You may already have a location in mind, but if you don’t have your heart set on a particular neighborhood, think about what areas are best suited for your commuting needs, school requirements, proximity to family and friends, and overall lifestyle — such as your nighttime activities, weekend pursuits, etc.

If you need help digging up information, try realtor.com/local. Enter a town, neighborhood, or ZIP code to find out more about the area, like the median home price and quality of public schools.

Now that you got that credit score to a place of honor, don’t blow it. Now is the time to walk the straight and narrow with your finances because your loan doesn’t get fully approved until it goes through underwriting—which usually takes place just a few days before closing. Avoid taking on new debt (e.g. getting an auto loan or buying a living room full of furniture on credit), opening new credit cards, neglecting student loan payments, or falling behind on credit card payments.

And so, your journey now has a template to follow. It’s not a journey for the faint of heart, but one worth someday looking back on. Do all the right stuff in the beginning and all that stomach acid will become a memory worth forgetting.

Realtor, TBWS

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