Homebuyer basics for first-time buyers

Preparation is key before you start looking for a home. Bank of America offers many online resources to help you explore the process of buying a home and understand the costs involved.

• Our Home Resource Center offers articles, videos, calculators and more.
• Better Money Habits® has articles that cover everything from loan application to closing.

Setting a budget can help you make affordable choices. Remember, homeowners have many costs that renters don't have to worry about. In addition to upfront costs such as a down payment and closing costs, ongoing monthly expenses may include:

• The monthly mortgage payment, which will include the principal and interest on your mortgage as well as property taxes and homeowners insurance.
• Utilities, including power, water, sewer and internet, plus other costs such as homeowners association fees.
• Savings for maintenance and unexpected repairs.
• All your other regular living expenses, including any other debt payments.

Tip: Most experts recommend spending no more than 28% of your pretax income on your monthly mortgage payment.

There are different mortgage options for different circumstances. Some may require a 20% down payment, others as little as 3%. A lending specialist can help you understand the differences. To get started:

• Check your credit score. The better your credit, the better your chance of getting a mortgage.
• Request your free credit reports. Make sure there are no errors that could affect your credit.
• Assess your savings. You'll need cash for a down payment and closing costs.
• Get prequalified^Footnote1 for a mortgage. This will tell you what you can actually borrow.

Tip: If you haven't started saving for a down payment, don't wait. You can also explore programs that help first-time homebuyers on the Bank of America Down Payment Center.

A little research and some help from a pro can help you find a home that's right for you.

• List your needs and wants. Needs are must-haves such as keeping your kids in the same school district or having a back yard for your dog. Wants are nice-to-haves that you could do without. Knowing the difference can help you stay on budget.
• Explore home listings online. It's easy and fun to look at lots of homes online, and it gives you a feel for the types of homes and price ranges in your area.
• Choose a real estate agent. A seasoned buyer's agent will know the local market and help you find a home, negotiate an offer and complete the paperwork. In many cases, their commission will be paid by the seller, not by you.

Tip: When choosing an agent, get recommendations from friends or family, or look online. Don't be afraid to talk with the agent first to make sure you'll feel comfortable working with them.

Once you've found a home that fits both your needs and your budget, it's time to take the big step: making an offer.

• If you haven't already, get preapproved^Footnote2 for a mortgage. A preapproval can help make your offer stronger. It requires more documentation than prequalification, but it can also speed things up after your offer is accepted.
• Work with your agent to submit the offer. Your agent will help you decide on a fair price and include contingencies that are designed to protect you if the home inspection finds serious problems.
• Put down a deposit by check, wire transfer or digital service. Also called earnest money, your deposit shows you're serious about buying the home. It’s generally 1% to 4% of the home's value and is held in an escrow account until closing, when it can be applied toward your home purchase.
• If the offer is accepted, notify your mortgage lender immediately. Then complete your application or, if you're preapproved, they can get to work on finalizing your loan.

Tip: If the offer isn't accepted, you can either increase your offer or continue your home search. Don't get frustrated! You may have a few disappointments before final success.

After your offer has been accepted, there are still details to work through, but the finish line is in sight!

• Complete any additional mortgage paperwork. Your lender will schedule an appraisal to confirm the home's value. Responding quickly to document requests is key to avoiding delays at closing. And be sure to keep copies of everything you send.
• Order a home inspection. An inspection may reveal items that need to be fixed. Your real estate agent can help negotiate with the seller to have them repaired.
• Purchase homeowners insurance. This is required and should be effective as of the date of your closing.

Tip: Typically it takes 30 to 45 days from loan approval to closing, so this is the time to start packing!

As you prepare for closing, avoid anything that could affect your credit and cause issues for your lender, such as making major purchases, opening or closing credit accounts, or changing jobs.

• At least three days before, you'll get the closing disclosure from your lender. Check all details carefully and compare them to the loan estimate you got when you applied.
• Bring a photo ID to the closing, plus a cashier's check or wire transfer for any down payment or closing costs.
• Read all paperwork before signing. Then get the keys to your new home!

It may seem like a long process, but if you take it step-by-step, you could be moving in to your first home!