As we begin the new year, you’re probably thinking about fresh starts. Getting in shape, reading more books or picking up a new hobby may all be on your to-do list as you plan your goals for the 12 months ahead.
Another popular New Year’s resolution is to become a homeowner. With the calendar flipping to 2022, it’s time to begin putting your hopes and dreams into action. Take these steps to begin your homebuying journey.
Prepare your finances
Before you dive into the homebuying process, you should get your financial ducks in a row. First, you want to save for a down payment, a percentage of your home’s purchase price that you pay up front when you get a mortgage.
The amount required for a down payment depends on the purchase price of your home and the loan type. While you may think you have to put down 20%, homebuyers actually have a lot of down payment options — with some enabling you to secure a mortgage with no down payment at all. The only contingency is that if you make a down payment of less than 20%, you’ll have to pay private mortgage insurance (PMI) each month until you build up 20% equity in your home.
When it comes to saving up for your down payment, don’t be afraid to think outside the box. Ally Bank’s Online Savings Accounts have Buckets and Boosters, which allow you to organize, customize and optimize the money in your Ally Bank Online Savings Account to make reaching your goal that much easier and more efficient.
As a homeowner, a down payment is just the beginning. The true cost of home ownership includes other one-time expenses — such as a home appraisal fee, home inspection fee and closing costs, as well as ongoing costs including your mortgage payment, property taxes, maintenance and utilities.
While you’re getting your savings in gear, it’s a great time to learn as much as you can about mortgage options and the process of applying for a home loan. Many myths around homebuying persist, so don’t make assumptions without getting the facts. For example, you may be surprised to learn you don’t need an excellent credit score to qualify for a loan, and you could potentially get a mortgage if you have student loan debt, too.
Applying for a mortgage may feel overwhelming and intimidating, but a little education on your options and how a mortgage loan works goes a long way toward increasing your confidence in the process. Different types of mortgages have different down payment and credit requirements, terms and interest rates. Take our quiz to find the type of home loan that’s right for you.
Get pre-approved and find an agent
Once your finances are in order and you’ve studied up on mortgages and the steps involved in buying a home, you’re ready to start the pre-approval process, in which you submit financial documentation to a mortgage lender and learn how much they’re willing to lend you and at what interest rate.
Getting preapproved for a mortgage can help make your offer more competitive because it shows the seller that you’re serious about the purchase and likely to be approved for a loan.
Now is also a great time to find a real estate agent. Working with a trusted agent can help you find homes, as well as navigate the offer and buying process. An agent can also negotiate on your behalf. It’s not absolutely necessary to work with an agent, though. You can always weigh your options by considering alternative approaches to buying a home.
Zero in on your ideal home
When beginning your home search, it’s important to get clear on what’s most important to you. Creating a realistic wish list will help you clarify exactly what you’re looking for in a home. Remember that finding your dream home is more of an art than a science, and a little flexibility could ensure you find an abode that may not be perfect — but is perfect for you.
Make your dream of home ownership a reality in 2022
The new year is the ideal time to reflect on your accomplishments and begin to plan for the future. If becoming a homeowner is one of your priorities in 2022, getting a head start on the process is a smart choice.
Check out Ally’s resources for first-time homebuyers.
Ready for a new home in the new year? Learn about your mortgage options.