10 Ways to Prepare for Homeownership
1. Decide what you can afford. Use this handy Home Affordability Calculator from Zillow to get a pretty good estimate of the home price you can afford based upon your income and debt profile. This is just a guide and is not the same as being preapproved for a loan (which involves submitting an application and providing documentation to a lender.) The interest rate, taxes and insurance are simply estimates. Interest rates are currently about 3% - 4% for a 30 year fixed rate loan.
2. Develop your home wish list. Give priority to the features on the list.
3. Select where you want to live. Compile a list of three or four neighborhoods where you would like to live, taking into consideration the schools, recreational facilities, area expansion plans, nearby hospitals, and safety.
4. Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment? FHA requires a minimim 3.5% down payment while at least 5% is required for a conventional loan. If you want to live in a more rural area outside of Atlanta, you may qualify for 100% financing with a U.S. Rural Development Loan. Gwinnett County offers the Homestretch Down Payment Assistance Program to first-time homebuyers (or those who haven't owned a home in three years) and the Georgia Dream Homeownership Program offers down payment assistance to several counties in Georgia. If you have an IRA account, you can use those funds to buy your first home without paying a penalty for early withdrawal.
5. Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and correct any errors immediately. (A credit report provides a history of your credit, bad debts, and any late payments.) Consumer expert, Clark Howard, recommends www.annualcreditreport.com.
6. Determine your mortgage qualifications. How large of a mortgage do you qualify for? Explore different loan options --such as a 30-year or 15-year fixed mortgage or ARMs -- and decide what's best for you.
7. Get pre-approved. Organize all the documentation a lender will need to pre-approve you for a loan. For example, the lender will need copies of your tax returns including W-2s for the last two years, last 2-3 months of pay stubs, and last 2-4 months of bank statements. I can provide you with a few lenders that I highly recommend.
8. Other sources of help for a down payment. In addition to the suggestions listed in #4, you can have money for a down payment "gifted" to you from family members (siblings, parents, grandparents, or aunts and uncles are usually acceptable). For an FHA loan, all of your down payment can be a gift from a relative. With a conventional loan, limits on down payment gifts vary from one lender to the next. The giver will need to write you a letter explicitly stating that the money is a gift and doesn't need to be repaid.
9. Calculate the costs of homeownership. In addition to the principal and interest on the mortgage, you will need to include the property taxes, hazard insurance, homeowner association fees (if applicable), utilities, maintenance, etc.
10. Contact ME! I am an experienced REALTOR® who can help guide you through the process. My personal goal is to find you a home that is better than you envisioned. If you are serious about buying a home, contact me. I check the "hotsheets" throughout the day for new listings, price reductions, and properties back on the market. If you aren't available to see a home quickly, I'll preview it for you so as not to waste your time. Call, text or email me. I'll respond quickly, even in the evenings or weekends.