You've decided that you want to buy a house, but you're not sure where to start. Buying a home can be a really daunting and competitive process. It's important to know what you need -- and want -- before you start submitting offers where you're on the hook for hundreds of thousands of dollars.
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Know Your Why
Sometimes, we can get caught up in the feeling that we should do something, without asking whether we want to. Are you buying a home because you feel like you should, or do you have some money saved up and want to make an investment? What are the prices in the area where you want to buy? Is it more affordable than renting? If no, why is it so important to own a home?
If your reasons are based on the fact that you have the money to invest and feel it would be a life improvement, then you're on the right track.
Once you've decided you're buying a home for the right reasons, make a list of what you're looking for in a home. Think about what you need to have versus what would be nice to have. What is make or break to you? Know that before you start looking for a home.
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Check Your Credit Score
Your credit score plays a big role in determining whether mortgage lenders will give you money and how much they'll lend to you. The better your credit history and the higher your score, the better chances you'll get a mortgage.
A conventional mortgage will typically require a credit score of 620 or higher. If your credit score is below that, take steps to build it up. You can make a budget to pay down debt or apply for credit cards that are designed to help build up your credit.
You can check your credit score from each of the three major credit agencies -- Equifax, Experian and TransUnion -- for free once a year. Your bank or credit card company might offer free access to your score or credit report as well.
Make a Budget
Just like every other big financial undertaking, making a budget is key. Experts recommend spending around 30% of your monthly income on housing costs. This includes mortgage, which is not only your principal balance (the cost of your home) but the interest rate. You'll also need to pay property taxes, which vary based on where your home is located and how much it's worth. Plus, you'll have to cover the cost of your homeowners insurance every month.