Thinking about buying your first home? Here are four ways to prepare for this important step.
1. Determine if homeownership is really for you.
How comfortable are you with putting down roots? Generally, it makes sense to buy a home if you plan to stay for at least five years. That's about how much time it takes to recoup your purchase costs. Otherwise, depending on the market, you may be tied to your home or forced to rent it out if you want to move.
2. Shop for a mortgage before you shop for a home.
Not sure how much house you can afford? Talk with a mortgage lender first. They can help you figure out a home price that fits your budget. Ideally, your payments shouldn't exceed 25% to 28% of your monthly gross income, and it's important to factor in your total debt, too.
Your mortgage lender can also explain all of the mortgage products available to you. When interest rates are low, a fixed-rate mortgage can be a stable and affordable option, especially for buyers who intend to stay in their homes for many years. But if you plan to sell sooner rather than later, an adjustable-rate mortgage (ARM) may make more sense. An ARM starts with a lower interest rate for an initial 5 or 7 years, then adjusts with market rates after that. Either way, knowing your options upfront will help you choose a home and a mortgage that work best for your situation.
3. Save for a down payment.
Wondering how much you'll need for a down payment? That depends on the type of loan, the home's location, and your income. But the sooner you start saving for a down payment, the better. Here are a few ways you can build up your savings faster:
- Reduce your current living expenses by taking on a roommate or moving in with someone.
- Make a budget to take control of your spending—and stick to it.
- Set up automatic transfers to your savings account.
- See if your employer will deposit a portion of your paycheck directly into your savings account.
4. Order your credit report.
Your credit report is a record of your bill-paying history. The higher your credit score is, the lower your interest rate will be. You can stay on top of your credit history by requesting a free copy of your credit report every year at annualcreditreport.com. When you correct any errors on your credit report and pay down debts before applying for a mortgage, you can boost your credit score and get a better rate.
Ready to get started?
Being financially prepared can help you begin the homebuying process with confidence. If you have questions, the Truist Mortgage team is here to help.