What is the first step in buying a house in Memphis?

Buying a Memphis area home is a significant life milestone that often marks a transition to a new chapter in one’s life.  It is an exciting process, but complex at the same time.  Getting started on the right foot is crucial.  The first step in buying a home sets the tone for your entire home-buying journey, so it is important to approach it with care and diligence.

The First Step – Assess Your Financial Readiness

Credit Score:  Your credit score is a significant factor in determining you are ability to get a loan.  Your credit score often determines interest rates and loan terms.

Budget:  It is imperative to determine how much you can afford to spend on your new home.  When determining a budget you should consider not just the amount needed for a down payment, but monthly mortgage payments that will include taxes and insurance.  Many financial advisors go by a broad rule of thumb…your monthly housing costs should not exceed 30% of your monthly income.

Down Payment:  Consider how much money that you have saved for a down payment.  This amount may dictate the loan type that you may need.  Traditionally a 20% down payment is ideal, as it avoids the need for Private Mortgage Insurance (PMI).  However, there are loan programs that require a significant amount less for a down payment.

Pre-Approval:  Before you begin your Home Search, it is important to get pre-approved for a mortgage.  This will give you a better idea of the amount that the bank is willing to lend you for your home purchase.  This involves providing financial information to the lender who will assess your creditworthiness and provide you with a pre-approval letter stating the maximum amount they are willing to lend you.

Connecting with a Lender is the first step to assessing your Mortgage eligibility.  If you have a Realtor, they can give several recommendations of Lenders.  This foundational step lays the groundwork for a successful home-buying process and will help you make informed decisions as you navigate the world of real estate.  You are now ready to move on to the next step!