Hey there, future homeowner! Get ready for an insightful journey into the realm of homeownership. In this comprehensive guide, we’ll delve into each step with clarity and precision, ensuring you’re well-prepared for the exciting path ahead.

1. Understanding Your Personal Financial Situation:

• First things first, let’s conduct a thorough financial assessment. Take a moment to evaluate your monthly income and expenses. This is the foundation upon which your homebuying strategy will be built, providing a clear picture of your financial capabilities.

Step 1: Assess Your Monthly Income:

• Start by calculating your total monthly income. Include all sources of income, such as your salary, wages, rental income, side gigs, and any other regular earnings.

Step 2: List Your Monthly Expenses:

• Create a comprehensive list of your monthly expenses. Categorize them into two main categories: fixed expenses and variable expenses. Fixed expenses include items like utilities, insurance, groceries, transportation costs, and debt payments. Variable expenses include discretionary spending on entertainment, dining out, travel, and other non-essential items.

Step 3: Determine Your Debt Obligations:

• Identify your existing debt obligations, including credit card payments, student loans (lenders will count a minimum of 0.5% of the outstanding balance or the documents payment after deferral has ended), car loans, and any other outstanding loans. These payments are part of your fixed expenses.

Step 4: Calculate Your Down Payment and Closing Costs:

• Decide on the down payment amount you’re comfortable with and estimate the closing costs associated with buying a home. Typically, down payments range from 0% to 20% of the home’s purchase price. Closing costs can vary but usually amount to 2% to 5% of the home’s price.

Step 5: Factor in Property-Related Expenses:

• Include expenses related to homeownership, such as property taxes (in Dallas Texas it is safe to use roughly 2% of the purchase price as an estimate, but your Realtor should be able to provide you an exact amount), homeowner’s insurance (roughly .59% of the purchase price in Texas), private mortgage insurance (if applicable, use .55% of the loan amount, this will vary with loan type, credit score and down payment amount), and home maintenance costs (budget about $1 for every square foot of livable space, every year, for annual home maintenance costs).

Step 6: Determine a Comfortable Debt-to-Income Ratio (DTI):

• Lenders typically use a front-end DTI and a back-end DTI to assess your mortgage affordability. The front-end DTI considers housing expenses (mortgage, taxes, insurance), while the back-end DTI includes all debts. A common guideline is that your front-end DTI should be below 35% of your gross monthly income, and your back-end DTI should be below 45%.

Step 7: Calculate Your Maximum Mortgage Payment:

• To determine your maximum monthly mortgage payment, subtract your existing debt obligations, property-related expenses, and a contingency for savings from your total monthly income. The remaining amount is the maximum you can allocate to your mortgage payment.

For an accurate mortgage payment calculation, use our mortgage calculator but you must sign up for our free mortgage mobile app to get the complete payment with taxes, insurance, and mortgage insurance.

2. Nurturing Your Credit Score:

Your credit score is your financial trustworthiness scorecard. It’s crucial to check it on AnnualCreditReport.com to ascertain its health. If it needs a boost, we’ll explore ways to enhance it for optimal lending conditions.

3. Saving Strategically for Your New Home:

Let’s determine the financial requirements for your dream home. Calculate the necessary down payment and anticipated closing costs. This step will kickstart your savings plan to make your homeownership dream a reality.

4. Get Pre-Approved for a Mortgage:

Pre-approval gives you a clear understanding of your budget and demonstrates your commitment to sellers. Connect with mortgage lenders to get pre-approved for a loan. They will evaluate your financial readiness and provide a pre-approval letter.

Not all lenders are created the same. A pre-approval letter can only be provided if you have delivered all your income and asset documents to the lender. If you don’t provide these and the lender tells you that you are pre-approved – RUN. There is a strong possibility that you could get denied right before closing. Ask your realtor. If you want a strong approval letter, let’s get started now.

Use our Purchase assistant to get in touch for your no obligation Pre-Approval letter.

5. Set Your Homebuying Criteria:

Define your priorities and preferences for your future home. Consider factors like location, size, number of bedrooms, and any must-have features. Are you willing to do some DYI projects? You can ever get a mortgage that allows you to finance in improvements. Having a clear vision will streamline your search. You might even want to do a test drive at rush your to determine your work commute.

6. Find a Real Estate Agent:

Partner with an experienced real estate agent who specializes in your desired area. An agent will guide you through the process, provide market insights, and represent your interests during negotiations.

PROTIP – Don’t ever use the listing agent to help you buy thinking this will save you money. The listing agent has a fiduciary responsibility to sell the home for the most money, this will work against you.

If you need a great realtor referral, just ask us or look on our recommend professional’s page.

7. Begin the Home Search:

Start exploring homes that align with your criteria. If you have selected a great realtor, they should be able to set you up on a property search that will find homes that fit your criteria. Remember, you need to stay within you budget and maximum approvable purchase amount they is detailed in your approval letter.

Utilize online listings on platforms like Zillow, Realtor.com, and Redfin to identify potential properties. Attend open houses and take virtual tours to narrow down your options.

8. Tour Homes with our Realtor and Ask Questions:

Schedule property tours with your real estate agent. During these visits, ask questions about the home’s condition, recent renovations, and any potential issues. It’s essential to gather as much information as possible.

9. Make an Offer:

Work closely with your agent to create a competitive offer for your chosen property. Your agent will negotiate on your behalf with the seller, striving to reach an agreement that suits your budget and preferences.

10. Complete Due Diligence:

After your offer is accepted, enter the due diligence phase. This includes property inspections, appraisals, and finalizing your mortgage application. Ensure that the home meets your expectations and is a sound investment.

At this stage, you can evaluate the inspection reports to ensure the home is sound and negotiate any required repair or withdraw from your offer.

11. Go To The Closing Of Your New Home

Carefully review all closing documents with your real estate agent and loan officer. Ensure that the terms align with your expectations and that you understand the financial aspects of the transaction.

On the agreed-upon closing date, sign the necessary paperwork, make your down payment, and officially become a homeowner. Celebrate this significant achievement!

Congratulations, superstar home shopper! You’ve completed your first-time homebuying adventure, and now you’re the proud owner of your very own piece of paradise. Enjoy every moment of making your new house a home