Are you ready to buy your first home in the Dallas area? If so, congratulations! This is an exciting time in your life. However, it can also be stressful—especially if you’re unsure how to financially prepare for your purchase. Fortunately, with the help of the right real estate agent and some knowledge of the home-buying process, you can set yourself up for success and ensure you are financially prepared for this large step. Here is more information on how to financially prepare for buying your first home.
Check and Improve Your Credit
Many first-time homebuyers go into the process without knowing what their credit score or history is and are surprised when they cannot qualify for the loan they want. Avoid this situation by checking your credit score (a score of 620 is usually required for optimal loans) and working with a mortgage company to get pre-approved for financing. If you find you cannot qualify for the loan you want, consider waiting to buy and spend some time improving your credit. Pay down credit card balances, ensure you make all monthly payments on time, and avoid taking out any new loans or credit cards to bump up your score and better position yourself for a mortgage.
Save for the Down Payment
Have Enough for Closing Costs
In addition to saving for a down payment, you will also need enough cash to cover closing costs, which are typically 3 to 5% of your loan amount. For a $449,200 home, the closing costs could be anywhere from $13,476 to $22,460. You will need to come up with this money during closing and before taking possession of your home. Most of those who are buying and selling at the same time will be able to use the equity from the sale of their home to cover closing costs as well as make a down payment on their new home. However, first-time homebuyers do not have this option. If you have not saved up enough to pay for closing costs, you can take out a short-term loan, borrow from a qualified retirement plan, sell assets such as fine jewelry, classic cars, or precious metals, or borrow from family members.
Get the Best Interest Rates
Understand the True Costs of Home Ownership
When deciding what they can afford when it comes to a home, many first-time homebuyers fail to consider all the costs of owning a house. In addition to budgeting for your monthly mortgage payment, you will also have to figure in interest and taxes, both of which can add hundreds of dollars to your monthly bill. You’ll also have to take into consideration what it takes to keep a home running smoothly. Depending on the neighborhood in which you buy, you may have to pay HOA dues, which can range anywhere from $100 to over $1000 per month. Make sure you talk with your Dallas real estate agent before choosing a home so you fully understand the fees you will be required to pay for buying in a certain neighborhood.