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How to become a homeowner

Are you counting down the days until you can become a first-time homeowner but aren’t sure where to begin? Before you start touring available homes, take time to make a plan. Careful budgeting and research along with hiring the right professionals will help ensure you’ll get the home you want at a price you can afford.

What do I need to become a homeowner?

Unless you can afford to pay cash for a home, you’ll need a mortgage to become a homeowner. Home loans are the most common way to purchase a home for those who qualify. While you may eliminate the cost of a mortgage by paying cash for a home, you’ll be left with no financial cushion if there’s an unexpected emergency. You may also have less cash on hand for inevitable repairs and maintenance.

10 essential steps to becoming a homeowner

There’s a lot to consider when you’re in the market to buy your first home. By following these ten helpful steps, you’ll be better prepared for the homebuying process and avoid first-time homebuyer mistakes.

  • 1. Determine your homebuying budget

    Taking time to review your finances and determine your budget is the essential first step to becoming a homeowner. Use the Guild Mortgage affordability calculator to get an idea of the annual income needed to qualify for a mortgage. It’s wise to remember that you’ll also have post-closing costs such as new furniture and routine maintenance, so consider these expenses when calculating affordability.

  • 2. Decide on a down payment

    A down payment is a portion of your home purchase price paid upfront. When you take out a mortgage, you’ll typically pay your down payment on closing day, with the remaining cost of the home paid in monthly installments. With affordable lending programs, several low or no down payment options are available. However, while lenders set the minimum down payment requirements, you can always pay more. A bigger down payment helps lower your borrowing costs and monthly payments. Once you decide on a down payment amount, add it to your homebuying budget and start saving.

  • 3. Know your credit score

    Request a free credit report to review your credit history. Check for any errors that may be negatively impacting your credit score. Understanding your credit score and how it can affect your ability to purchase a home is integral to the homebuying process and will contribute to your overall preparation.

  • 4. Research mortgages available to first-time buyers

    All mortgages are not the same—and there’s one out there tailored to your needs. Do your research about the different mortgage types before sitting down with a lender to learn more about available loan options.

  • 5. Find an experienced loan officer

    A loan officer will explain your financing options, help you choose a mortgage that’s right for you and update you at key milestones in the mortgage process. Look for a loan officer with experience in the type of loan you’re considering. Then interview your potential mortgage lender before getting pre-approved. Ask about credit, income and down payment requirements, mortgage terms, as well as possible down payment assistance programs.

  • 6. Get a pre-approval letter

    A pre-approval letter is our promise to give you a loan based on certain terms and conditions. Pre-approval gives you direction on what homes you may be able to afford, as well as how much you should save for a down payment. In a competitive market, it can be valuable to show sellers that you’re pre-approved to buy. With this, you can confidently start shopping for your new home.

  • 7. Hire a real estate professional

    Buying a new home is often the most significant financial purchase of your lifetime. With a real estate professional by your side, you’ll be better prepared to find the ideal home without overpaying. Start your search by asking for recommendations from friends and family who have recently bought in your area. Then, take the time to research and interview real estate agents until you find an experienced partner that best suits your needs.

  • 8. Research homes and neighborhoods

    To avoid getting caught up in the moment, create your must-have and nice-to-have wish list of features for your home, and abide by those guidelines. Then attend open houses in your targeted neighborhoods to get a sense of what’s selling, the location and how a home in your price range might compare to others in the neighborhood. Share your lists and findings with your agent so they can help you make informed decisions.

  • 9. Make a competitive offer

    Your real estate agent’s job is to negotiate the price and sale conditions to ensure that you get the best deal. Agents have access to information about what other homes have sold for in the area to ensure you don’t make an offer based on emotions and spend more than necessary.

  • 10. Plan and prepare for closing

    Once your loan receives final approval during the mortgage underwriting process, you’ll get the “clear to close.” This means you’ll soon be signing the final loan documents and moving into your new home. Don’t be afraid to ask for explanations at any point in the closing process, and make sure you read all the documents thoroughly before signing.

Requirements to be a homeowner

Each lender establishes its minimum requirements to determine if you qualify for a mortgage to become a homeowner. Depending on the type of loan you’re seeking, other guidelines may come from government agencies. Once you’ve submitted the required documents, mortgage underwriters will assess factors such as credit history, income and current debts, capacity to repay and your employment status. Find more tools to prepare yourself for homeownership with the Guild Mortgage homebuyers loan guide.

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.

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About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.