Buying a home for the first time can present a daunting challenge for even the most savvy and informed consumers. The decision to transition from renting to purchasing may be the single, most important financial choice that a person makes during their lifetime. As such, an aspiring homeowner should thoroughly research and prepare for every facet of an increasingly complex transaction. The below checklist is designed to provide practical assistance to folks who have decided to invest in real estate for the first time.
Self-Audit Your Finances– Create a spreadsheet which depicts all of the debts (rent, student loans, credit card bills,utilities, car payments) owed in a given month in one column along with all of the income earned during that same month in another column. This exercise enables you to visualize your debt to income in a central location. While you’re at it, compile all of the financial documentation that you utilized to build the spreadsheet and save it in a safe yet accessible spot (I recommend scan and .pdf). Eventually, you’ll be asked by a lender to produce all of this data for their analysis.
Clear Any Outstanding Delinquent Debt – Pull your credit score, along with a credit report for anyone else who intends to contribute to buying a home with you. A credit report is valuable not only because you (and any co-buyer) will need to maintain a respectable score in order to qualify a loan but also for the information it contains about any delinquent payments or liens tied to your financial identity. If applicable, it’s imperative to immediately bring all loan and credit card balances current as well as take care of any pending tax liens. Addressing your overdue obligations will both enhance credit score and reduce overall debt.
Narrow Down Potential Location(s) – If you reside in a large city, you probably wouldn’t be comfortable (much less happy) in every part of town. The most enjoyable aspect of this checklist (by a long shot) is driving through different communities to get a feel for them by reference to the homes, businesses, and people that inhabit it. Take your dog for a walk or ride a bike in the local park, grab a beer and a burger at a non-chain restaurant, and/or stroll through an open house to really familiarize yourself with the demographics, pace, and character of the neighborhood to see if it would be a good fit for your lifestyle.
Seek Personal & Professional Advice – Informally derive as much information as possible from your friends who live (or have lived) in the areas in which you are considering buying. People who have lived in the exact neighborhood(s) which appeal to you can offer the most informed and detailed perspectives on what life will be like for the next 30 years (average length of a mortgage loan). Once you are comfortable with the notion of purchasing in a particular location(s), seek some professional assistance in the form of a realtor and lender to help you navigate the next steps of realizing your dream of home ownership. In Colorado, a realtor working as a buyer’s agent is always free to the homebuyer. While realtors are generally able to refer a lender to a potential purchaser, it is highly advisable to shop around to multiple lenders to determine which institution can deliver the best value.
The Fun Part! – Once you have entered into a contractual relationship with a realtor and qualified for a loan, it’s time to start seeing homes in person! Instruct your realtor as to your unique specifications (price, number of bedrooms/bathrooms, type of structure, neighborhood, presence of a hot tub, etc) for your dream property. A competent realtor will use your criteria to search for available homes to bring to your attention. Request showings and additional information from your realtor whenever you see a property on the market which piques your interest. Viewing multiple homes will assist you in finetuning your necessary characteristics for a property while also empowering your decision on whether to submit offer to buy the place.
I sincerely appreciate you taking the time to read this post. Please contact me with any questions concerning this article or the state of the housing market along the Front Range.