Congratulations on your wedding and congratulations on starting to think about your first house! We recently purchased our first home this is all pretty fresh to me, too.
We started the homebuying process about six months before our apartment lease ended. The first thing we did was a pre-approval to find out what our buying power was from a bank’s perspective. Obviously, what you can afford is not necessarily the same as what the bank will approve you for. But it allowed us to know what was feasible in terms of a final home price — and it was up to us to determine what we could afford and were comfortable with spending.
A pre-approval is different than being pre-qualified. A pre-approval runs your credit and is taken much more seriously when it comes to putting an offer on a house. A pre-approval isn’t a guarantee of a mortgage loan — you will still have to apply for a mortgage — but it’s a great indicator that you’re financially stable enough handle the house purchase and pay the bank back.
Getting a pre-approval is also helpful for when you DO find a house you like because it shows the buyer that you’re serious, and it means you’re much more likely to get financing than a buyer who hasn’t already been approved by a bank/credit union/etc.
Our preapproval was good for 60 days I think? Some are good for 90. Make sure to ask what happens if you get pre-approved but don’t find a house within that window. (The bank we went through would have just extended the pre-approval window.)
From a paperwork perspective, get a hold of your pay stubs, bank statements, tax returns, and any proof of any other assets — retirement accounts, mutual funds, anything that shows additional assets in your name. It took me hours to pull up and make copies of this info (I kept originals for me and provided copies to the bank).
And I agree with the tips on your downpayment. Know where that money is coming from, and be ready to show that you have the funds available. If you get a windfall of money in your account too close to applying for your actual mortgage (which you’ll have to do in addition to being pre-approved), the bank is going to need to know where it came from.
And I agree with making sure you know what’s comfortable for your monthly payments. Don’t forget about taxes and homeowners’ insurance — that can add significantly to your monthly payment. If you don’t put 20% down, you’ll likely have to pay private mortgage insurance each month as well, so 20% is preferable but obviously not everyone can swing that. You will still have options, but just be aware that there will be some other costs and factors involved.
Find a realtor you trust. Have any of your friends recently bought homes and might recommend their realtors? From personal experience, I’d say go through someone who you can trust to be good at the job, and not just someone you know. I had to do a lot of legwork that my realtor should have been doing.
And the most fun and yet also frustrating part — get on the same page as your husband with your priorities: location, number of beds and baths. What is a dealbreaker and what can you be flexible on? What are you willing and not willing to take on or give up?
And like someone else said, know what your options are should housebuying take longer than you expect. Can you go month-to-month on your apartment lease? Or, can you afford to go month-to-month? (The month-to-month rates at our place were as much as our mortgage + insurances + taxes on our house!)
It sounds silly, but I totally bought the Home Buying Kit for Dummies. I really wanted to know what was going on every step of the way, and it helped enormously, along with a ton of online research so I always knew what we should be doing.
I’ll let you know if I think of anything else! I know it’s a lot to take in, but so worth it. Good luck!