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Buying

Keys to Buying with Confidence
Buying a new home is a complex process. That’s why you need an experienced guide to help you avoid costly mistakes. Check out these tips.

  • Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income.
  • Develop your home wish list. Then, prioritize the features on your list.
  • Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account schools, recreational facilities, area expansion plans, and safety.
  • Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.
  • Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
  • Determine your mortgage qualifications. How large a mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.
  • Get pre-approved. Organize all the documentation a lender will need to pre-approve you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months’ of bank or credit union statements.
  • Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your first home without paying a penalty for early withdrawal.
  • Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.

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