Follow these steps when eyeing your new home

No matter what stage you’re in, homeownership can be stressful. That’s especially true in today’s market, which has been hampered by higher loan interest rates, low inventory and high-priced listings. Whether you’re in the market for a new home or your first home, it’s easy to let yourself become intimidated by the prospect of homeownership. 

It doesn’t have to be scary. With a little knowledge and preparation, you can be prepared for the homebuying process. 

Determine your homebuying readiness 

Before you even consider buying a home, it’s important to know how the homebuying process works. It starts with making sure you’re financially ready to make such a large purchase. Factors to consider include your total savings, total debt and credit history. These factors will help determine your qualifying loan amount, interest rate and how much you can afford as a down payment. 

Speaking of down payments, the more you can pay up front, the lower your payments and the higher your equity. Typically, homebuyers try to put down 20 percent. This isn’t a requirement, but doing so could help reduce the interest rate on your mortgage. If you are able to pay 20 percent as a down payment, you won’t have to pay for private mortgage insurance, which will save you even more money. 

Once you determine you’re ready to buy a home, it’s a good idea to get pre-approved for a mortgage. By getting pre-approved, you will have a solid understanding of the amount of the home loan you qualify for, and it will eliminate that step when you are ready to make an offer. 

Types of loans 

When you go through the pre-approval process, talk to your mortgage loan officer about the different loan options available. A conventional loan is the most common type of mortgage and is generally available to buyers with good credit histories who have a significant down payment. 

There are other options that are backed by the federal government that could reduce closing costs. Once you are pre-approved and have an idea of what type of mortgage you need, it’s time to start home shopping. Be sure you stick to your budget as determined by the amount you were pre-approved for. 

Look at as many houses as you can, to get a sense of the type of home you need. 

Documents you’ll need 

Once you’re ready to apply for your mortgage or pre-approval, you can make the process more efficient by having the following documents and information ready for your mortgage loan officer.

• W-2 forms from the past two years.
• Pay stubs from the past 30 to 60 days.
• Federal income tax returns from the past two years.
• Bank statements from the last two months.
• Information about your other long-term debts.
• Driver’s license and Social Security number.
• Any other information your lender requires.