Step 0. Search homes to see if any
home that you like.
Step 1. Are you ready to buy a home?
When buying a home, you will be faced with many decisions.
The first is whether you are actually ready to buy. Finding
the right home is not always easy, and getting a mortgage loan
can be time-consuming and complicated. To help you decide if
you’re ready to buy, let us take you through the steps
a mortgage lending institution uses to decide if you qualify
for a mortgage loan. When you take out a loan, you sign documents
that say you promise to pay back the loan. When a mortgage
lending institution makes your loan, it has determined that
there is a good likelihood that you can keep that promise.
The mortgage lender knows that it does not help you or the
lending institution if you are given a loan, but then, for
any reason, are unable to make the payments each month. To
decide if you will be able to repay the loan, the lender will
look at many different pieces of information about you. This
process is called “underwriting.” These pieces
of information show how well you have repaid your debts in
the past, whether you are likely to repay your debts in the
future, and your ability to repay the mortgage and your current
debts. There are some general guidelines that help a lender
in looking at these pieces of information about you. But you
should also remember that there is some flexibility in these
guidelines, because everyone’s financial situation is
different. If you are very strong in one area, it may help
balance out another area in which you aren’t quite as
Step 2. Find out how much you can afford.
You can save yourself a lot of time if you take a minute to
figure out how much mortgage you can afford ahead of the time.
In general, a lender will want your monthly debts (including
car payment, credit card debt and mortgage payment) to total
no more than 29% of your monthly gross income ( your yearly
salary divided by 12). You also need to consider current loan
interest rates. The lower the interest rate, the more expensive
the home you'll be able to afford. Follow our tips and use
these simple calculators to see how much you can afford in
a mortgage payment. Visit the following two links to find out
- How much home can you afford?
- Buy vs. Rent
Step 3. Locate the candidate properties
Complete the new home check list. Search the local newspaper,
ask friends/relatives/co-workers. Drive around the neighborhood
that your candidate property located. Search on the local multiple
listing. Finally and most effectively is to find a good realtor.
You'll want to start searching for a broker as soon as you
decide to buy a home. Talk to several and find someone you
think you'll be comfortable working closely with. Many of your
friends and relatives have probably bought and sold their homes
through brokers. Ask them who they used and what their experiences
were. You can find out which brokers specialize in the kind
of home or the area you want by looking in the Yellow Pages
or your local newspaper's classified real estate ads. Or drive
through neighborhoods and note the names of brokers on "for
sale" signs. When you talk to prospective brokers, ask
questions about the areas and types of homes in which you're
interested. Do they seem knowledgeable? Most important, is
their personal style a good fit with your own? Here is how
to select a good realtor.
Step 4. Shop for the mortgage to finance your future
Many different kinds of mortgages are available to you. Read
about them, and make sure you understand the pros and cons of
each. Your real estate broker can help you. HUD offers some special
homebuying programs. Also, many local governments offer special
homebuying programs to help low-income homebuyers. Shop around
- you may be surprised at all your options!