Buying your first home is something you anticipate for most of your adult life. You envision the way the house looks and how you will fill up the rooms. You see what your future life will look like in this home. Buying a home is one of the most exciting things you’ll ever do, but actually getting to that point can be difficult. The financial process of home ownership is anything but easy.
To be able to afford a house, you will probably need to budget and save money for months, if not years, prior. Just to buy a home, you need a good credit score, money for a down payment, preapproval for a mortgage loan, and a real estate agent. It’s definitely a long process and you can’t expect to buy that dream home overnight. Before you even think about buying a home, you must first get your finances in order. Here is how to finance a home in 4 steps:
1. Save Money
First and foremost: to buy a home, you need to have a considerable amount of your money saved up. The more money you have saved for a down payment, the less of your monthly income you will have to spend on the mortgage. So as soon as you start thinking about buying a home, allocate some of your income to a downpayment. This is an important time for you to take your finances seriously and budget carefully. Your future home depends on it!
2. Shop for a Lender
Unless you anticipate being able to pay upfront for your home, you’re going to need a loan. And in order to get that loan, you need a mortgage lender. However, don’t just settle for anyone, you’ll want to spend some time shopping around for a lender. You should compare interest rates, closing costs, and terms to determine who is the best fit for you. You may want to consider using commercial hard money lenders that offer fast approval and funding with minimal paperwork. Just make sure you do your research before deciding on a lender.
3. Decide How Much You Can Afford
Another important step in financing for a home is figuring out exactly how much you can afford. You don’t want to go through this entire process and then fall in love with a house that’s completely out of your budget. Instead, determine how much you can realistically afford as early on as possible. For help with this, you can use a home affordability calculator that will break down the costs and make things more clear.
4. Get Preapproved for a Loan
Getting preapproved for a loan is a crucial step in the homebuying process. This ensures that you will be able to obtain the loan you need to buy the home and is based on your income, assets, and credit score. Preapproval showers a seller that you are qualified and makes you a more attractive buyer. It also gives you some more flexibility with negotiating prices with a seller and can help you close the deal faster. You want your homebuying process to go as smoothly as possible, and that means getting preapproved for a loan.
Once you have completed all the above steps to finance for your home, then comes the fun part: actually searching for a house. While this process might be daunting and tedious, it is important to ensure that you are financially capable of buying a home. This is one of the most important things you will do in life, so you want to take your time and make sure you do it right.