Embarking on the road to homeownership can be an overwhelming prospect for first-time homebuyers, especially when answers to questions like, Am I financially ready to purchase a home? and How do I know what I can and cannot afford? linger in homebuyers minds. The following five tips explain how to make purchasing your first home an exciting, well-thought out, and enjoyable experience.

  1. Pay-off all debt - To be blunt, homeownership is expensive. While it may seem like your monthly house payment will be less than your current rent, it is important to keep in mind that owning a home involves more than the down payment and mortgage; it also requires all maintenance, insurance, and upkeep costs. Reducing debt can ensure that the mortgage process will go smoothly because it helps improve your debt-to-income ratio. Paying-off all debt may also increase the mortgage amount you will pre-qualify for upon completing an application.
  2. Save for a down payment - Building off the previous tip to pay-off all debt, perhaps the most important step prior to purchasing your first home is to save money for the down payment. While paying for the total price of a home up-front is what most strive for, the fact of the matter is that it is (usually) not feasible for most buyers. With this being said, buyers should strive to put down 20% of the home's purchase price and finance the other 80% with a mortgage to avoid paying for private mortgage insurance (PMI), which costs 1% of the total loan value and is added to your monthly payment.
  3. Generate an emergency fund - While the down payment and mortgage are the greatest expenses you will face upon purchasing your first home, you must remember the breadth of fees that are still to come. First-time homebuyers, and all homebuyers for that matter, should have an emergency fund of three to six months of expenses in place prior to purchasing a home, to cover fees such as closing costs, which typically account for two to five percent of the loan amount. Additional costs will be regular maintenance expenses, property insurance, property taxes and the possibility of higher utility bills.
  4. Get pre-qualified - After you have paid off all debt and saved an adequate sum of money, it is time to get pre-qualified for a loan. A mortgage pre-qualification means that a loan officer has looked over your income, debts, assets and credit history, and thus determined how much money you are able to borrow. While pre-qualification does not guarantee you will be approved for a mortgage, it is an important step in the home-buying process because it gives you confidence in your budget, establishes your credibility as a homebuyer, and can expedite the closing process.
  5. Differentiate between needs and wants - Purchasing your first home is an exciting endeavor, but as a first-time homebuyer, it is important to remember that your first home will most likely not be your dream home. Enter into the homebuying process with an open and realistic mind. Create a physical or mental list of your specific needs and wants but be ready to comprise. For a first-time homebuyer, getting emotionally invested can be a slippery slope, but being realistic about your non-negotiables is integral to a smoother process. It is not the number of bedrooms or modern upgrades that will make your first house a home, it is those who live in it and the memories you make that will make that seemingly plain, yet affordable house, a home.

If you are looking to purchase or build a home, lower your monthly payment or turn your home's equity into cash, NDBT Mortgage has the products and expertise to help you. Consult one of our mortgage experts at 972-716-7379 today, or visit https://www.ndbt.com/personal-mortgage.html for more information.

Equal Housing Lender     EHL