10 Ways to Prepare for
Homeownership
1. Decide what you can afford.
Generally, you can afford a home equal in value to between
two and three times your gross income.
2. Develop your home wish list. Then, prioritize the
features on your list.
3. Select where you want to live. Compile a list of
three or four neighborhoods you’d like to live in, taking
into account items such as schools, recreational facilities,
area expansion plans, and safety.
4. Start saving. Do you have enough money saved to
qualify for a mortgage and cover your down payment?
Ideally, you should have 20 percent of the purchase price
saved as a down payment. Also, don’t forget to factor in
closing costs. Closing costs — including taxes, attorney’s
fee, and transfer fees — average between 2 and 7 percent of
the home price.
5. Get your credit in order. Obtain a copy of your
credit report to make sure it is accurate and to correct any
errors immediately. A credit report provides a history of
your credit, bad debts, and any late payments.
6. Determine your mortgage qualifications. How large
of mortgage do you qualify for? Also, explore different loan
options — such as 30-year or 15-year fixed mortgages or ARMs
— and decide what’s best for you.
7. Get preapproved.
Organize all the documentation a
lender will need to preapprove you for a loan. You might
need W-2 forms, copies of at least one pay stub, account
numbers, and copies of two to four months of bank or credit
union statements.
8. Weigh
other sources of help with a down payment.
Do you qualify for any special
mortgage or down payment assistance programs? Check with
your state and local government on down payment assistance
programs for first-time buyers. Or, if you have an IRA
account, you can use the money you’ve saved to buy your fist
home without paying a penalty for early withdrawal.
9.
Calculate the costs of homeownership.
This should include property
taxes, insurance, maintenance and utilities, and association
fees, if applicable.
10. Contact a REALTOR®. Find an experienced REALTOR®
who can help guide you through the process.
