1. Decide what you can afford: Generally, you can afford a home equal in value to between two and three times your gross income.
2. Develop your home wish list: Then, prioritize the features on your list.
3. Select where you want to live: Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety.
4. Start saving: Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.
5. Get your credit in order: Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments.
6. Determine your mortgage qualifications: How large of mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.
7. Get preapproved: Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements.
8. Weigh other sources of help with a down payment: Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.
9. Calculate the costs of homeownership: This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.
10. Contact a REALTOR®: Find an experienced REALTOR® who can help guide you through the process.