Unless you are an investor, purchasing a home is much more than a financial transaction. It evokes the same exhilarating emotions of when proclaiming “I do” in marriage—after all, it is a committed response to our desire for stability, belonging, and communion.
More than simply a “house,” our home is a refuge from the world. A storehouse for future memories. The cradle and launchpad for our children’s dreams. Our sunny patch in the world in which to sink roots. The cozy, nurturing womb of friendship and camaraderie. A sacred space of arrival. A safe harbor.
Like marriage, the timing for buying a house is when we are ready to entwine our roots in a community and landscape which resonate with our unique lifestyle and innermost needs and values. It is a decision with an expanded horizon.
Charged with such profound human emotions, it is imperative to approach this decision with a clear head, wide-open eyes, and the guidance of a real estate professional familiar with the many pitfalls into which far too many buyers—especially first-timers—usually fall into. You need a trusted ally who will place your interests and desires ahead of the sale.
Based on our vast experience developed over decades in this industry, we have devised a roadmap that has come in handy while helping scores of families acquire their first homes. Below are the essential pieces that must be in place before you are ready to say “I do” to your first home:
Familiarity & Long-Term Commitment
You’ve taken the time to become intimately acquainted with the community, neighborhood, schools, open spaces, amenities, etc. of your chosen location, and are ready to make a long-term commitment. Your time-horizon should be no less than five years. Don’t buy for the life you have today. Reflect on your long-term plans. If you’re not yet certain, consider renting for a while to further your exploration.
Your source of income must be stable and with solid future prospects. Not having steady work for the last two years could potentially impact your eligibility for a mortgage loan.
- You have saved enough for a 20% down payment which will lower your monthly payments, and, in most cases, eliminate the need to carry private mortgage insurance.
- Your debt payments – credit cards, student loans, personal loans, and future mortgage – must not exceed 36% of your gross monthly income.
- You have enough cash to cover moving expenses, furnishings, and potential improvements to your new home.
Financial House In Order
- Your credit score is the first thing a mortgage lender will check to determine your eligibility. For a conventional mortgage loan, your FICO score should not be lower than 620. Before applying for a loan, check your credit score and, if needed, take steps to improve it.
- Make sure your tax filings are up to date. Lenders generally expect to see one to two years’ worth of tax returns.
- Lenders will also require bank statements and proof of income (W-2s, paystubs, etc.) from the past one to two months.
Whatever you do, don’t buy a house simply because:
- Mortgage rates are low.
- Someone told you it’s a good investment.
- You just graduated and got a job.
- Most of your friends are doing it.
Choosing a home is one of the most important choices you can make in life. As much as it is part of the American Dream, it can also turn into a nightmare.