What Is the First Step to Buy a Home?

Buying a home is one of the most significant investments you will make in your lifetime. It’s an exciting journey filled with opportunities, but it can also be overwhelming if you don’t know where to start, especially in Denver. So, what is the first step to buy a home? Let’s break it down.

Assess Your Financial Situation

Before you dive into the world of Denver real estate, it’s essential to take a close look at your financial health. This initial assessment will set the foundation for your home-buying journey.

1. Evaluate Your Credit Score

Your credit score plays a crucial role in determining your mortgage eligibility and the interest rates you’ll be offered. A higher score usually translates to better loan terms. Obtain a copy of your credit report and check for errors or areas that need improvement. If your score is lower than you’d like, consider taking steps to boost it before applying for a mortgage. I know excellent lenders who you can consult with about an effective strategy to improve your score (before you even consider applying for a loan).

2. Determine Your Budget

Understanding how much you can afford is vital. A common rule of thumb is that your monthly mortgage payment should not exceed 28% of your gross monthly income. Use online mortgage calculators to get a rough estimate of how much home you can afford based on your income, debts, and down payment. 

3. Save for a Down Payment

While some loans allow for minimal down payments, saving for a larger down payment can significantly reduce your monthly payments and eliminate private mortgage insurance (PMI). While you've probably heard the rule of thumb is to save at least 20% of the home’s purchase price, most first-time homebuyers in Denver don't take this approach. There are 2,000+ programs available for first-time homebuyers that will help with down payments and such (allowing some to only pay $5,000-10,000 to get into their first home in Denver).

Be Prepared to Compromise

Mindset, education, strategy, and patience are the keys to owning your first Denver home. Once you have a clear enough understanding of your financial situation, it's time to get pre-approved for a mortgage! Being pre-approved is essential as you'll want to be ready to make an offer when you find a home you love (that may be eyed by other buyers). To navigate our real estate market, you'll want to work with a great lender who will review your financial information, provide excellent resources and solutions like downpayment assistance, and expertly determine how much they can lend to you.

1. Gather Necessary Documents

To get pre-approved, you’ll need to provide several documents, including:

• Proof of income (pay stubs, tax returns)

• Employment verification

• Bank statements

• Details of any outstanding debts

2. Shop Around for Lenders

I'm happy to provide you a list of seasoned lenders who've helped my first-time buyers get into their first homes. Not all lenders offer the same terms and rates, so it’s wise to shop around. Compare interest rates, fees, and customer service reviews. Getting multiple quotes can save you thousands over the life of your loan. And working with a local, trusted lender will provide you a better experience (compared to national or online-based companies).

Understand Your Needs and Wants

As you prepare for your home search, we'll take some time to outline your needs and wants in a property. We'll determine your must-haves such as:

• Location: Proximity to work, schools, and amenities

• Size: Number of bedrooms and bathrooms

• Style: Single-family home, condo, or townhouse

• Future Growth: Potential for appreciation in value

Start Your Home Search

With a pre-approval letter in hand and a clear understanding of your needs, you’re ready to embark on your home search. We'll create an effective search strategy by using online listing search sites, attending open houses, scheduling showings, and exploring neighborhoods to find your perfect fit.

In Conclusion...

The first step to buying a home is to assess your financial situation. By evaluating your credit score, determining your budget, and saving for a down payment, you’ll lay a solid foundation for your home-buying journey. Working with a great Denver lender and getting pre-approved for a mortgage will empower you to make informed decisions as we navigate the real estate market. Buying a home is not just a transaction; it’s a significant milestone in your life! So we'll take our time, do our research, and I'll help you enjoy the process as much as possible! I look forward to our house hunting together!