How to Prepare for Your First Home

The real estate business can seem complex, especially when you are purchasing your first home.

However, once the process is complete you’ll see that it’s really not complicated at all. With a little preparation, purchasing your first home is actually quite simple. When done right, your first home purchase will result in an affordable mortgage on a house that you’ll be proud to call home…

Buying Your First Home? What to Expect, How to Prepare

Think About Your Wants and Needs

When discussing a home purchase, many professionals and buyers get caught up in the numbers. They discuss percentages and interest rates and loan-to-value ratios, but they don’t take the time to think about what they really want in a home. Yes, a house can be considered an investment, but your primary residence has much more emotional significance than an investment account.

Before you start diving into the hard details, sit down and think about your wants and your needs for a first home; it may even help to write out a list. How many bedrooms do you need? Do you want a pool, a big back yard, or a large porch? Be sure to separate these into two categories, the first being your wants, or things that you’d like to have, and the second being your needs, or things that are absolutely required from the home.

Determine Your Budget

Now that you know what you would like in a home, it’s time to start looking at the numbers and really determine how much you can afford, both in total and on a monthly basis. The first step is to determine exactly how much money earn during a month. This sounds easy, but you may be surprised how few people really understand their monthly income. Look at all income sources, including salaries, wages, and bonuses to determine how much you make a month.

The other step is to determine your expenses, and we don’t just mean your official debt load, but also expenses on food, clothing, utilities (which will change if you move), travel, and entertainment. You may want to track your expenses for a full month so you understand how much you spend.

With your full income and expenses, you should be able to determine your monthly budget, which will guide you towards the full amount that you can afford. Of course, this is not an official number, but merely a way to predict your home-buying budget.

When estimating your budget, be sure to factor in your downpayment. This will impact how much money you need to borrow, and could also determine which lending options are available.

Prepare Your Financial Information

Now it’s really time to get organized by preparing all your financial information and documents. Lenders will want to see as much information as possible, so make sure you have documents that verify your income, expenses, credit rating, and more.

One of the most important documents for your mortgage loan is verification of income. Lenders will need to verify your ability to pay off a loan, so be prepared with documents such as W-2 forms from previous years, as well as recent pay stubs and tax-return information. If you are self-employed, you may need additional documents, such as 1099 forms, profit-and-loss statements, and more. In most cases, lenders will require that you have been self-employed for at least two years before they issue a loan.

The lender will also want to see a complete list of your debts, which should include credit cards, car payments, student loans, and any other financial obligations. Legal obligations, such as child support, small-claims judgements, or alimony, should be included as well.

If possible, it also helps to bring a list of your financial assets. This can be a diverse list of any financially-valuable property, from investment accounts to expensive machinery. Any item, be it physical items or money in the bank, can be included. Having additional assets can help increase your potential borrowing power.

Get Pre-Approved

Getting pre-approved will help you purchase a first home.

Before you start shopping for a house, it’s important that you get pre-approved for a loan. Real estate agents and home sellers want to know that you can actually afford the loan you need for your home, so head to your bank or credit union for a sit-down with one of their lending professionals.

There is a difference between pre-qualification and pre-approval. Pre-qualification is an unofficial document from the lender stating that you will qualify for a certain amount. This is simply a way for lenders to give you a rough estimate for how much you may be able to borrow. Pre-approval, however, is more detailed but also more official. This process involves more information and verifications, but at the end you have a conditional commitment, in writing, that the lender will supply a mortgage loan for a certain amount.

This step is crucial, as many real estate agents won’t work with buyers until they are pre-approved.

Start Looking at Homes

This is the phase you’ve been waiting for! Now that you understand your housing needs, your budget, and have pre-approval for a specific loan amount, you can start looking for a house. Working with local real estate agents, you can start visiting homes on the market and choose the one that works best for you and your family.

While it’s easy to get excited at this point, we’d encourage you to take your time with this step and look at a few houses. Remember, real estate is a significant financial commitments (likely the largest purchase of your life), so take your time, ask lots of questions, and look at every home with a critical eye. With patience, knowledge, and plenty of questions, you can understand which home is the perfect choice for you!

Helping You Navigate Your First Mortgage Loan

If you need help navigating the complex lending market, work with the helpful team at San Diego Purchase Loans. We’ll help you understand the fundamentals of each loan option so you can make a fully-informed decision.

From FHA to jumbo loans, we are here to help you achieve your homeownership dreams.

LEARN MORE ABOUT FIRST-HOME MORTGAGE LENDING

Testimonials

“Hey Chad – thank you so much to you in particular as well as your team. It’s been a real pleasure working with someone who’s as responsive and helpful throughout the process, as you’ve been. We really appreciate what you’ve done. ”

Chad Baker and his team are amazing!

My husband and I found Chad through an article he had written. Every aspect of working with Chad and his team was exceptional. From our initial phone call where he explained the many options we had, to advice he gave in dealing with somewhat challenging sellers, and closing our loan ahead of schedule, the loan process with Chad and his team went very smoothly. I especially appreciated the one-on one guidance from Juliann, who really made me feel like I was her only client. I look forward to working with Chad and his team again and would highly recommend them to anyone looking for a mortgage.

“This is the second time that I have worked with Chad (home purchase & refinance). He has become my subject matter expert and someone I depend on for all finance needs related to our home and real estate investments. My favorite things about Chad are his depth of knowledge, responsiveness, honesty and the great service he provides. I have referred countless friends and family of mine to work with him for no other reason than I know that he will treat them well and equip them for the best possible outcome. Chad will add tremendous value to any real estate transaction that you have and I am grateful to have him as a resource.”

I hope you enjoyed reading this article. It's my goal to keep you updated with the latest real estate mortgage news. I'm proud to provide you with 100% original and unique content. Subscribe now to get high quality real estate mortgage content and articles delivered directly to your inbox. Chad Baker is Regional Manager for Cross Country Mortgage. Chad is consistently recognized in the top 1% of mortgage originators in the United States 2011-2019. Got a question for Chad? Call (858) 353-8331 or submit your question online