1. Decide what you can afford. Generally, you can afford a home equal in value to between two and three times your gross income. Running some rough numbers will help you get an idea of what price range of home you can afford to buy in the Morristown, NJ area.
2. Develop your home wish list. Then, prioritize the features on your list. Setting a list of top five things for your wish list is great place to start. Check out my home buyer wish list.
3. Select where you want to live. Compile a list of three or four neighborhoods you’d like to live in, taking into account items such as schools, recreational facilities, area expansion plans, and safety. Are you interested in homes in Butterworth Farms in Morris Township, NJ, Convent Station homes, or in Burnham Park homes? If you aren’t familiar with neighborhoods consider instead setting a parameter such as single-family homes within 15 minutes from the Morristown Green, condos close to the Morristown Train Station and access to 287 south, etc.
4. Start saving. Do you have enough money saved to qualify for a mortgage and cover your down payment? Ideally, you should have 20 percent of the purchase price saved as a down payment. However most first-time buyers put down less than 4% on their home purchase. Also, don’t forget to factor in closing costs. Closing costs — including taxes, attorney’s fee, and transfer fees — average between 2 and 7 percent of the home price.
5. Get your credit in order. Obtain a copy of your credit report to make sure it is accurate and to correct any errors immediately. A credit report provides a history of your credit, bad debts, and any late payments. A mortgage consultant can help you determine where your credit stands.
6. Determine your mortgage qualifications. How large of a mortgage do you qualify for? Also, explore different loan options — such as 30-year or 15-year fixed mortgages or ARMs — and decide what’s best for you.
7. Get pre-approved. Organize all the documentation a lender will need to preapprove you for a loan. You might need W-2 forms, copies of at least one pay stub, account numbers, and copies of two to four months of bank or credit union statements. Having pre-approval is key to making a serious offer on a new home. I can’t emphasize enough how important getting mortgage pre-approval is. Every home purchase offer needs to have buyer mortgage prea-pproval for it to be taken seriously by a home seller. This is perhaps the most important ways to prepare to buy a home as you will seriously know how much home you can afford.
8. Weigh other sources of help with a down payment. Do you qualify for any special mortgage or down payment assistance programs? Check with your state and local government on down payment assistance programs for first-time buyers. Or, if you have an IRA account, you can use the money you’ve saved to buy your fist home without paying a penalty for early withdrawal.
9. Calculate the costs of homeownership. This should include property taxes, insurance, maintenance and utilities, and association fees, if applicable.