I Want to Buy a House, Where Do I Start? Questions for First-Time Homebuyers

January 6, 2021 | 4 min read | The mortgage process
I want to buy a house where do I start, questions for first time homebuyers, what credit score is needed to buy a house, how much home can I afford, what are things to look for before buying a house, is now a good time to buy a house

The home buying process may seem overwhelming to those entering the market for the first time, especially since buying a home is often one’s most significant milestone in life. Taking the time to learn how to best prepare for the mortgage financing journey may help alleviate some stress. Our first-time homebuyer guide outlines some great questions to ask yourself before diving into the house hunting journey.

Do you have your Financials and Documents in Order?

This is an excellent first question to ask yourself before you are considering buying a home. Review our mortgage documentation checklist to see if you have all the required basic documents, such as tax returns, bank statements, and personal identification. Today, many people have their financials on their mobile devices, making gathering financial documents more straightforward and quicker.

Do you Have Money Saved?

Usually, a down payment of about 20% of the home’s purchase price is recommended to get the best interest rate. There are, however, specific lending programs that allow you to put less than 20% down. Review your savings account balances and how much money you are putting into savings each month. Then, think about how much of that money you may be able to use towards a down payment.

Helpful tip: even if you have enough money saved up to pay all cash for a home, getting a mortgage may still be a better option since interest rates remain at all-time lows!

Do you Have a Stable Job and Steady Income?

It is best to buy a home or apartment when you have maintained a regular income for a couple of years and plan on keeping the job for the foreseeable future. The mortgage underwriter will see if you have a reliable job and consistent monthly income to ensure your ability to repay the loan. If you recently changed jobs, you may need to provide employment and income documentation from your former and current position.

How Much Debt do you Currently Have?

Even if you may have a steady income, you should review how much debt you have before thinking about getting a mortgage. Having large debts can make it challenging to secure a mortgage, as adding on more debt will increase your debt-to-income ratio. Debt may include car loans, student loans, credit card debt, or medical bills. Try paying off these debts as much as possible before starting the home buying process!

  • The 36% Rule
    The 36% rule is a rule that mortgage companies follow when evaluating your current debt-to-income ratio. This rule states that a homebuyer should not spend more than 36% of their income on debts (this means ALL debt – car, student loans, credit card debt, a mortgage, etc.).

    Before looking for a home, consider totaling up all your monthly debts and compare that against your total monthly income. Once you see how far away (or above) you are from that 36% number, you will get a better idea of what income will be available for a mortgage payment after accounting for your current debt obligations.

What Credit Score is Needed to Buy a House?

It’s always a good idea to understand where your credit score is before applying for a mortgage. Although there is no specific credit score needed to buy a house, a higher credit score may translate into a lower interest rate. A credit score is just one factor that helps a mortgage company determine your loan details. If your goal is to improve your credit score before applying for a mortgage, click here!

After I’ve Reviewed my Financials, How Much Home Can I Afford?

After reviewing your monthly income and debts, you may better understand how much home you can afford. However, it’s best to contact a mortgage specialist to get pre-approved­ to determine how much house you can afford officially.

Another way to estimate how much house you can afford is to use our home buying calculator.

What are Things to Look for Before Buying a House?

Every homebuyer has different needs. Create a wants and needs checklist to determine your “must-have” features to help narrow down your future home search! Here are some recommended things to look for before buying a house:

Location: Determine if you want to live in the city or suburbs, live close to public transportation, or near parks recreational centers.

Neighborhood: You should always walk or drive around the community and local town to get a feel for the area’s vibe! Make sure you feel safe, comfortable, and welcomed.

Number of bedrooms and bathrooms: This need may vary depending on how many people will be living in the home.

Living space arrangement: Do you love to entertain? If so, you may prefer an open concept living space.

Age of the house: Always ask the real estate agent the age of the house and the age of the appliances to get a better idea of the potential condition of the home.

The yard: Some people prefer smaller yards for less maintenance, whereas others want larger yards for their kids or dogs to play.

Is Now a Good Time to Buy a House?

This is a common question that first-time homebuyers ask. This answer depends on how ready you are to take the leap of faith and purchase a home. If you reviewed the questions above and feel confident in your ability to take on the responsibilities of owning a home, then you may be ready! As always, you can rely on your mortgage specialist to provide advice as to if now is a good time for you to purchase based on your credit profile.

If you’re interested in moving forward in purchasing your home, click here to review the step-by-step guide to the mortgage process!