Are you in the exciting position of preparing to buy your first home? This is a big step that can lead to the accumulation of wealth, a more stable lifestyle, and all the joys that come with owning your own home.
However, it can also be stressful — especially if you’re unprepared and unsure what to expect. Before you move forward and start looking at Castle Rock homes for sale, consider the following tips.
1. Make sure you’re ready to commit
When you are buying a home, you’re making a big commitment. The average mortgage is for a term of 15-30 years. Though most will not remain in their first home that long, you should at least be prepared to stay for five years to build up equity.
In addition to committing to staying in the home, you will also need to determine if you are able to commit financially. When you buy a home, not only will you have to pay the monthly mortgage, taxes, and homeowners insurance, but you will also have to pay for anything that goes wrong with the home, regular maintenance, utilities, and any homeowners association dues.
This could add up to thousands more dollars a month than you were paying when you rented. If you’re not prepared to make that type of financial commitment, you may not be ready for homeownership.
2. Check and strengthen your credit
To qualify for a conventional loan, you will need a credit score of at least 620, and to qualify for the best rates, your credit will need to be in the 700s. It’s best to know early on if your credit is lacking so you have a chance to improve it before you apply for a loan.
To strengthen your credit, pay bills on time, try to reduce revolving debt, keep current cards open and refrain from applying for any new loans or credit cards.
3. Get pre-approved for a loan
Once your credit is in good shape, you can visit a mortgage lender to get pre-approved for a loan. When you get pre-approved for a loan for a Castle Rock home, you will get a better idea of how much you can spend and you’ll know that sellers will view you as a good-faith buyer.
When you visit with your lender, ask what type of loan programs are available to you. You may be able to qualify for an FHA or USDA loan, though these usually come with additional fees.
4. Understand what you can afford
When you are pre-approved for a loan, you will get a number that states what you will likely be able to qualify for when you apply for a mortgage. However, this number is based on your credit score, salary, and debt-to-income ratio and will not take into consideration your monthly bills or spending habits. It’s up to you to create a detailed budget and understand what you can spend each month on your mortgage and other added expenses and still have room to save and have some discretionary funds.
5. Save as much as you can
To avoid private mortgage insurance and other fees, you will need to put at least 20% down on Castle Rock homes. In addition, you’ll need to come up with the money to pay closing costs and moving costs.
If you are buying a median-priced Castle Rock home listed at $632,078, you would need to save more than $126,000 for a 20% down payment and anywhere from $12,500 to $31,500 to cover closing costs. If you don’t have this much saved, you may opt for a loan that requires less down or you can explore federal or state programs that provide down payment assistance.
6. Understand your needs and wants
When you start shopping for your first home, it’s easy to get carried away and think you can get everything on your wishlist. Unfortunately, your “dream home” may not exist in the current market or you may find that Castle Rock homes that have all the amenities you want are way out of your price range.
That’s why it’s a good idea to make a list of your must-haves and a separate list of your wants to share with your Castle Rock real estate agent. Must-haves might include details like school district, number of bedrooms, and style of home, while wish list items could be a dedicated home office or a luxury master bath. Keep in mind that you can add wish list items down the road if you choose to remodel or upgrade.
7. Work with an experienced Castle Rock real estate agent
As a first-time homebuyer, an experienced Castle Rock real estate agent is your best friend. A professional agent will connect you with a reputable mortgage lender, help you find homes that match your needs and are within your budget, and help you write an offer that will be appealing to sellers.
Your agent will also represent you in a multiple offer or bidding war scenario — something that is common in a competitive real estate market like the one Castle Rock is currently experiencing. When you work with an agent, much of the stress of the home-buying process will be taken off your shoulders and you’ll be able to enjoy shopping for homes.
Being a first-time homebuyer is a landmark in most people’s lives and one that can be fulfilling, exciting, and a step toward financial security. To ensure your home buying process is successful, consider the tips in this article and make sure to work with an agent as early on in the process as possible.
Ready to take the next step? Reach out to one of the trusted Castle Rock real estate agents at The Meridian Group for guidance.