Buying your first home is a huge milestone in your life. For most people, it’s one of the biggest purchases they’ll ever make, which is why it’s very important to take this whole process very seriously. You don’t want to pay more for a home than you have to. And you don’t want to end up over your head with a mortgage payment you can’t afford.

5 Steps to Buying Your First Home

With a bit of preparation, you can confidently make an offer and get approved on a home that you love. It is devastating to fall  in love with a home, only to be declined for the mortgage.

To make buying your first home a positive experience, I invited real estate professionals Vinny Valentino and Carrie Vass of Calcagni Real Estate to give us some insider tips.

Here are the 5 Steps to Buying Your First Home. Enjoy!




1. Get your finances in check

Buying your first home is one of the most important transactions you’ll make. Vinny recommends that you speak with your financial advisor and lender. He adds, “You want to make sure that everything is in order and understand what steps you need to take in order to start looking and get pre-qualified for a home.”

I would also add to make sure you have an adequate emergency reserves, and that you are in the best position to be approved for a loan. There’s nothing more terrifying than closing on a home, only to find out that you don’t have enough money to cover the repairs and expenses that come with owning a home.

Here are some extra helpful money tips to be mindful of:

  1. Keep your credit utilization ratio low.
  2. Don’t apply for new credit.
  3. If you’re using a majority of your available credit, this will send a red flag to most lenders.
  4. Pay off as much debt as possible without impacting your savings efforts. Debt payments include auto loans, student debt, credit card debt and any other installment or revolving debt.

Carrie mentions a challenge that a lot of people have is not knowing where you stand, financially. She says, “People think they’re ready to go because they have money in the bank but their debt to income ratio still might not work for them.”

Your financial advisor will help you gain clarity on where you stand. They’ll also offer advice and direction on where to focus your financial attention today. At Clear Path Financial Planning, we provide you with a monthly report that shows your progress and readiness for buying your first home.


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2. Find a good lender

Home loans are available from several different types of lenders. The most common being commercial banks, credit unions, mortgage companies and brokers.

Make sure to shop around and compare offers. It can be difficult knowing if you’re getting a good deal if you haven’t compared it to other offers. Overpaying by just one percent on your mortgage can be the difference of paying $100 more a month and $30,000 more in interest over a 30-year term*. That’s a lot of money.

Student loans can also be a big factor in picking your mortgage lender. Most traditional lenders require a maximum debt-to-income ratio of 36 percent for a loan approval. Throw in your student loans, a car payment, and some credit card debt and you might find it difficult buying your first home.

But don’t fret just yet.

If your credit score is at least 580 or higher, you may qualify for the Family Housing Administration (FHA) loan. FHA loans are also pretty flexible as they allow for a higher debt-to-income ratio of up to 43 percent.

There’s also the Fannie Mae HomeReady® mortgage loan, which is available to student loan borrowers and serves low- to moderate-income borrowers.

Here are some tools to help you:

Debt-to-Income Calculator

Mortgage Affordability Calculator

Free Annual Credit Report (No credit card needed)

*Assuming a mortgage of $160,000 with an interest rate of 4.5 % vs a 3.5%.


3. Hiring a real estate agent

When it comes to working with a real estate agent, there are a lot of professionals out there to choose from.

Carrie suggests looking within your own social network. She says, “Find someone that’s familiar with your area and is very knowledgeable. People often ask for a personal referral, and find an agent that way, overlooking online.”

You can also find an agent through online directories like Zillow and Trulia. However, Carrie and Vinny mention that it’s probably not the best way to go about it when buying your first home. “You’re kind of taking a chance working with that person.” Anyone can put their face on there by purchasing an ad.

Vinny adds, “I’d rather go with a (local) agent that’s skilled in the area and knows about the schools.”

Working with a professional real estate agent, like Vinny and Carrie, can make you feel more comfortable. They work for a very reputable company and are experts in their field. Because they’ve both worked with people in my social network, I see them as being all the more trustworthy.


4. Start looking at houses

Carrie advises that you’re probably ready to start looking at houses when you have your finances in order.

She adds, “You can go and look at your first house and fall in love with it. But if you’re not in the position to put the money down that you need to, you only have so much time before closing and getting your lender’s approval”.

Vinny and Carrie mention that the housing market is really happening right now, and that houses are going quickly, so you want to be ready to move forward. Having everything lined up and ready to go will definitely put you in a better situation to get that dream home.


5. Make an offer

You’ve found a house that you love and you want to make an offer. Where do you begin?

Vinny and Carrie recommend to have your real estate agent look at comparable houses in the area and compare prices. Making an offer isn’t as simple as coming in lower than the asking price, and trying to find a happy middle ground between buyer and seller.

When it comes to making an offer on a house, here are some things you should be considering:

  • Is this house listed where it should be? Is it overpriced, or is it priced correctly?
  • Has the seller dropped the price on the house?
  • How long has the house been on the market?

Your realtor should be doing their homework for you. They should be able to determine if the seller’s asking price is fair based on comparable homes in the area. If it’s not, your realtor can justify your offer to buy.

A comparable home (or comp) is a home that’s sold recently, like the one you want to buy. It’s nearby, like within a mile, and it’s a similar style home.

Carrie adds, “If it’s a ranch home, you want to compare it to another ranch. You’re not going to compare a ranch to a colonial, even if it’s on the same street. It’s not the same style home. We look at what an appraiser would look at.”

In the end, whether you’re buying or selling a home, it’s an extremely personal transaction. Sellers can get attached to their homes, having raised their family in it or having done much of the remodeling themselves. And sellers want a really good deal at tens of thousands of dollars lower than the asking price.

A good real estate agent like Vinny or Carrie can help separate much of that emotion. They’ll work very hard to give you the courage and confidence that you’re making the right choice.


Buying your first home: Conclusion

Buying your first home can be very overwhelming, especially when you start making offers. The process is very heavy with paperwork and documenting your finances. I know people who have backed out of the entire house hunting process because they were sure they were financially prepared.

Putting together a good team of advisors (financial advisor, lender, real estate agent, and closing attorney), can help you gain the courage and confidence you desperately want and need.

Work hard to pay down your debts to bring you into that 33 percent debt-to-income zone, but make sure you’re saving at the same time. People have a tendency to only save or only pay down debt. It’s difficult to do both at the same time, but it’s necessary.

It’s as much of a challenge to buy a house with no debt and no cash, as it is having lots of debt and lots of cash.

It’s pretty common for people to think that they’re not ready for home ownership, and if you’re not, that’s okay. Work hard to pay down your debts. But make sure that you do so while saving at the same time.

People have a tendency to focus on one area of their financial life, like their debt, but   they end up sacrificing another, like building up their savings. It’s great if you’re crushing that debt, but you also want to save up for a down payment.

I definitely recommend reaching out to Vinny and/or Carrie. Follow them on social media so that when you’re ready, you can drop a message in their inbox. And if you want to get your finances in better shape, enroll in my free 30 Day Money Challenge.

5 Steps to Buying Your First Home

Vinny Valentino: Facebook | Instagram | LinkedIn

Carrie Vass: Facebook |  LinkedIn

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