As a first-time home buyer, you will experience successes, failures, and everything in between throughout the home-buying process. With that being said, equipping and applying home-buying knowledge and skills will help empower you to make the right decisions. Even before your house search, there are steps you can complete. Other steps are best done during the search, and the remaining steps can be completed once you are settled in your new home.

We will first delve into the steps that should be taken before your search for a house. These steps will help you get an affordable mortgage for a home you like.

Section I: Before the search

1. Forecast a budget. Consider the additional costs you will have as you pay for a mortgage, insurance, property taxes, repairs, and maintenance in your current budget. Another factor you should consider is whether the home you're buying is your first home or your forever home. The total housing cost should exceed 28% - 30% of your income. You must choose the size of the mortgage and the house's value instead of trusting lending institutions to extend your comfort zone credits. The house's value should be at most three to four times your yearly net income. Your mortgage should be at most 75% - 80% of the value of your house. For example, if your annual net salary is $41,000, and you found a house valued at 164,000 (4 times your salary), you should only mortgage 131,200 (80% of the value of the house) and be able to pay at least 26,240 (20% of the mortgage) as a down payment.

2. Research your surrounding areas. When picking an ideal home, factor in your job location and the regulations and taxes in your country, city, and school district. You'll want to choose a home that is an ideal distance from your employment location and factor in driving and car expenses.

3. Research amenities and facilities. For example, if you know that you would like to have a gym membership and there is a gym near one of your potential homes, then factor that amenity into your budget.

4. Create your list of negotiable and non-negotiable items and build flexibility accordingly. It would help if you kept an open mind, but at the same time, you need to be aware of your deal breakers.

5. Shop for a loan. It is essential to shop for a loan before looking for a house to save time looking for a property you cannot afford.

Government-backed home loans that are offered

- - First Time Home Owners Loan (FHA loans) - for qualified first-time homeowners
  - USDA Loans- for qualified individuals in an eligible suburban or rural location
  - VA loans - for service members or veterans who meet the qualifications
- Refrain from applying for additional forms of credit or services that do a credit check. Your credit score impacts the interest rate you get on your loan; it's even more important when you are closing on a home not to do anything that will decrease your credit score.

6. Search for a real estate agency. You should find an agency that works with you as a buyer's agent, not just the seller's agent. Examine an agency's reputation and services online before agreeing to work with them.

7. Search for real estate closing companies. These companies may provide cheaper services than a real estate law firm.

8. Make a list of all the financial information/documents. The lender requires these documents to process your loan, so ensure you have easy access to them. These documents include but are not limited to your W-2, proof of down payment, prior-year taxes, payroll check stubs, prior-year taxes, savings account balance, gift letters from people who wish to help you financially, etc. You must also include a list of all your debts ( credit cards, auto loans, student loans, etc.) and must have a list of all assets.

Check Your Knowledge!

Check Your Knowledge: Mortgages

All Chapters:

[Chapter 1]: Introduction to Mortgages

[Chapter 2]: What Are the Fundamentals of Mortgages?

[Chapter 3]: What Makes Up A Mortgage?

[Chapter 4]: What is An Amortization Schedule?

[Chapter 5]: How Can I Secure A Good Mortgage?

[Chapter 6]: What Do I Need to Know as a First-Time Home Buyer?