The First Steps to Homeownership: 11 Tips and Tricks

In your grand plan of where you want life to take you, there’s a good chance that one of your ultimate goals is to own a home. Finding that perfect house might seem like a lofty dream, but it doesn’t have to be! There’s plenty you can do right now to make your home-owning dreams a reality. And taking the proper steps sooner rather than later will make a huge difference in the long run.

To help you get started on those first steps to homeownership, here are 11 tips you’ll definitely want to consider:

1. Ask yourself why you want to buy a home—This is a huge question and the first thing you should be asking yourself. Why exactly are you in the market for a house? Are you looking for stability in your life and career? Are you looking forward to establishing roots in one neighborhood? Building equity? This is the critical phase where you need to decide what kind of lifestyle you want to be living over the next five to seven years, and if staying put is something you’re ready to do, you’re probably ready to purchase a home.

2. Create your home wish list—Now is the time to figure out the big things you’re looking for in a home. Do you want fancy features or a big yard? A three-car garage or lots of bathrooms? A finished basement? A fixer-upper that you can pay less for now and pour some sweat equity into later? Now is the time to decide, not when you’re touring houses.

3. Avoid debt and job changes—If you’re really serious about buying a home, now is not the time to indulge in big impulse buys and wanderlust. Keep your finances as stable as possible so lenders can see that you’re a reliable investment. Always, always pay your bills and credit cards on time, and resist the urge to suddenly change jobs or go on that expensive European tour. Right now your house hunt needs to be your top priority.

4. Find out what you can afford—When you’re first starting out, it’s a good idea to look through your budget and see how much you can actually afford to spend on a house. A monthly mortgage payment should never exceed 30 percent of your income, and you’ll also need cash for a down payment and other home-buying fees. Find a good home affordability calculator online to give yourself a more accurate estimate of how much house you can actually afford.

5. Ask the important questions—There are a number of key points you need to know about your house hunt before it happens. To give you an idea, answer all of the following questions:

  • Where do I want to live?
  • What is the neighborhood like?
  • What is the crime rate?
  • Would I be moving into a good school district?
  • Are there any zoning restrictions?
  • Does this home have potential to increase in value?
  • How far is this home from my job?
  • Is there room to expand if we need to in the future?

6. Check your credit score—This is a huge factor in homeownership that you need to start thinking about now. Having a good score will give you better lending opportunities and save you thousands of dollars over the lifetime of your mortgage, so check your free credit report online. It’s never too early to start making decisions that will improve your FICO score.

7. Start saving now—I cannot emphasize this point enough. Take a good look at your finances and figure out where you can cut back and how much you can save per month. In a perfect world you should have a 20 percent down payment and 2 to 7 percent set aside for closing fees. Houses get expensive, so plan to save up more than you think you’ll need.

8. Get pre-approved—It may seem a bit soon for this, but now is the time to choose a home loan lender and get preapproved for a loan. Shop around online and ask your friends and family for good lender recommendations. As soon as you have all your documentation in order—W-2 forms, pay stubs, account numbers, bank statements—your lender can preapprove you for a loan.

9. Research your financing options—Do you qualify for a special mortgage or government assistance programs? For example, a VA loan will allow you to buy a home with significantly lower interest rates and no money down at all. Now is your time to figure out if your first-time buyer status can cut you any breaks. Also keep in mind that you can use alternate income sources like an IRA to buy a home without any withdrawal penalties.

10. Find a realtor—Having the support of a professional will help you out so much in the long run. Ask around to see what realtors or companies your neighbors and friends recommend. Once you’ve found that great person, he or she will be able to guide you through the home buying process and look out for you during offer negotiations.

11. Consider taking a homebuyer education course—There are lots of education courses online for first-time homebuyers, so jump on Google and see what you can find. The more you know about the entire process, the more prepared and confident you’ll feel in this journey. Good luck in all your home-buying pursuits!