Real Estate6 Month Checklist For the First-Time Home Buyer in Charleston, SC

Making the leap from renting to buying can be daunting when you don’t know where to start, and it can feel like an overwhelming and intimidating task. That’s where having an experienced Realtor can make a difference in helping you understand the process and help guide you along the way. Their goal is to simplify the home buying process – whether it’s your first home or your third. For a first-time home buyer knowing “what to do when ” is key, so we’ve made a list of what to do 6-months before buying your first home to ensure a smooth transition from renting to buying. And, in this booming Charleston SC real estate market, even seasoned home buyers can benefit from understanding the importance of early preparation. 

What are some signs to look for that mean you might be ready to buy your first house? Check out these “5 Reasons to Say Yes! “  Once you’ve determined that this is indeed the right time to buy, following these steps is key.

Find out what your credit score is. There are many credible sites like CreditKarma and Annual Credit Report that pull your score from the three credit bureaus. Equifax, Experian, and TransUnion are required by law to give you a free credit report once a year. Knowing your credit can give you an idea of where you are and where you need to be in six months. Your preferred lender can help you by suggesting different programs or offer advice on paying off loans to increase your credit score. Also, knowing what is on your credit report can help you find errors. A study found that 5% of Americans identified errors on their reports that resulted in higher interest rates on loans.

Determine your budget. Lenders use your credit scores to qualify you for a loan program but, they use your income and a debt-to-income ratio to determine how much you can afford. You also need to understand the difference between what you can afford and what you want to afford. Calculate what your mortgage would be per month and add that to any other monthly debts like car loans, student loans, credit cards, etc. Lenders do not calculate phone bills, electrical bills, or cable bills in their debt-to-income ratio, but it would be beneficial to you to add that to your monthly budget.

Save money for a down payment. Many first-time home buyers get an FHA loan which only requires 3.5% down. It would be in your best interest to save much more than that. Based off of good credit, you could get a conventional loan with 5-10% down. You will also need extra cash for closing costs, home insurance, and inspections. These items can be negotiated to be paid by the seller, but it is best to have the money in your bank account just in case. If you are receiving a gift loan (cash from a family member), it is also a good idea to have that money in the bank for over 45 days and to have it properly documented.

What Charleston lifestyle are you looking for? Choosing what kind of lifestyle you prefer in the lowcountry can determine what area you want to live in. There are a variety of lifestyle options from the easy, “walk everywhere ” lifestyle of living downtown on the peninsula, to beachfront with sunrise views,  however, for a first-time home buyer, you may have to sacrifice either the size or the location of the home to make it affordable. Remember, this is a starter home, so prioritize what is most important for the next five or so years. Homes in the Charleston market go quickly, so it is important to know what you want and what you are willing to trade-off when deciding on what home to buy.

Assemble your loan paperwork. Banks are very specific when it comes to applying for a loan. This requires a lot of paperwork. It will feel less daunting if you can collect these items ahead of time:

• W-2 forms – or business tax return forms. If you are self-employed and getting a conventional loan, you will need only 1 year. If you are doing any type of government loan (FHA, VA, etc.) you will need at least two years of tax returns.
• Personal tax returns
• Recent pay stubs
• Credit card and other loan statements
• Bank statements
• Previous and current addresses dating back two years
• Retirement account statements, 401k (if applicable)

Shop interest rates. Don’t just stop after looking at one bank. Shop rates around town with large, small, and local firms. Once one bank checks your credit, it will not harm your credit again for another six months. This means you can have as many banks as you want check your credit with only one hard hit. Banks offer different types of loan programs, which reflect different interest rates and fee structures, that may work better for your situation.

You are now ready to get pre-approved for your loan. This means that you know your credit, have money saved, paperwork assembled, and you have a good idea of what kind of home you are looking for. 

Note:  As a first-time home buyer, paying attention to the preparation will help your both your lender and your Realtor. This will also make you more confident and knowledgeable about the home-buying process. Knowing your budget and your limits will make you more competitive than other buyers in the market. It also ensures that you look at homes that you can actually afford. Once your agent has your pre-approval letter, he or she can target homes that meet your priorities and price range.