Are you planning to purchase a new home in 2024? You’re in luck! A recent report shows that experts are predicting mortgage rates to come down at some point this year. Even though they may not reach pre-pandemic levels, the market should be much more favorable for buyers than it was last year. Before you begin house-hunting, there are several things you’ll want think about and prepare for first.
Here’s a list of some things to consider taking care of before finding your perfect home.
1. Determine what you want in a house
The decision to purchase a new home is exciting! Before you begin your search, you’ll want to determine what features you want in your new home. How many bedrooms and how many bathrooms do you need? Would you like your new home to have a basement, garage, or back yard? It’s also ideal to consider what area you’d like to purchase in. Do you want to be close to family and work, or is there a certain school district that you’d like your kids to attend school in? Having these things determined prior to looking at homes will make your house search go more smoothly.
2. Save for your down payment closing costs
Two major, up-front expenses you’ll be responsible for during the homebuying process include your down payment and your closing costs. There are many misconceptions about needing to put 20% down to purchase a home. Andy Newbold, Mortgage Branch Manager for First Bank Mortgage, says, “Many would-be homebuyers believe that you need to put 20% down to purchase a home, which isn’t accurate.” He continues with, “There are many low-down payment options, including VA Loans with 0% down, FHA Loans with 3.5% down, and Conventional Loans with 3% down, just to name a few.” Additionally, First Bank offers a HomeReady® Mortgage Program with a 3% down payment for home purchases and refinances, as well as reduced mortgage insurance. You don’t have to be a first-time homebuyer and it’s designed for credit-worthy borrowers of nearly all income levels.
For your closing costs, these typically average between 2% - 6% of the total loan amount. This usually includes your title insurance, origination fees, appraisal fees, and other things. If you know the purchase amount range you’re looking to buy in, an idea of what the interest rate will be, and the term of the loan you are wanting, you can use this calculator to help you determine what you should expect to pay for your closing costs. Keep in mind, this is just an estimate, and the actual cost may vary.
3. Improve your credit score
Your credit score plays an important part in the homebuying process. Most lenders use the FICO credit score and will look at your credit reports from Experian, Equifax, and TransUnion. The higher your credit score is, the better rate and term available for your loan.
For information on how to improve your credit score, read Home Buying Tips: Are You Getting the Credit You Deserve?
4. Find a real estate agent
Having a real estate agent during the homebuying process can be a tremendous help. They’ll look for homes that match your budget and wish list, schedule viewings, negotiate the offer and price, and much more. Typically, the seller will be responsible for paying the agent fees, but it’s always a good idea to have extra funds saved just in case.
5. Get pre-approved
Something to consider before you begin your search is securing a mortgage pre-approval. Your lender will take a detailed look at your financial situation and write a letter stating how much they are willing to lend you. While this is not a guarantee that you will get the loan, submitting a pre-approval with your offer shows the seller that you are serious about purchasing the home and that the lender has already assessed your financial situation. Once you are pre-approved, refrain from things like making large purchases, receiving unusually large deposits into your bank account, or having a change in employment status or income. These are all things that can impact your pre-approval.
Review our Home Purchase Checklist for the documents you’ll need for your mortgage application.
As you begin thinking about your homebuying journey, consider what you want in a house, if your financial situation is where you want it to be, and that you have your pre-approval in hand before looking at houses. Having these things taken care of ahead of time will make the process go smoother and quicker.
For more information on First Bank’s mortgage solutions or to find an advisor near you, visit First Bank Mortgage.