Arizona Home Buyer's Guide
Buying a Home is a BIG Commitment: Ask Yourself, Am I Ready?
Step 1 Evaluate and Prepare
Begin the home buying process by speaking to a lender so you know what you can afford. Then explore areas in your price range.
Here's a handy Phone App to you can use while driving through neighborhoods you like. It will give you an idea of area home values so you'll know if it's in your price range.
The Arizona Buyer’s Advisory is a useful resource to learn the pros and cons of different area.
Be sure to call your Sonoran Sky Real Estate agent early in the process to setup a customized home search. Keeping an eye on areas you like will help familiarize you with the market.
If you are totally new to home buying, here are some things to consider.
Examine your current situation and ask yourself these questions:
- Are you financially ready to buy a home? If not, creating a budget to allocate your income is a good place to start.
- Are you planning any major life changes that could impact your finances? Things like changing jobs or starting a new business, getting married or starting a family.
- Can you commit to living in a home for at least 5 years? It takes time to recoup the expense of buying a home, and building equity largely depends on market conditions. Knowing you can stay makes it less likely you’d have to sell in a down market.
- Is your job and income steady and stable? You need both to get a loan. Some people choose to live debt free, so they have no FICO score since they are not on the radar of credit agencies. If this is you, talk to a good lender about getting a loan based on your job history and income alone.
- Know your FICO score Currently you can get a FHA loan with a FICO score of 600. That’s lower than it’s been in years.
- Do you pay off your credit card debt quickly? Keeping your Debt to Income ratio (DTI) low will help you qualify for a better mortgage. Typically, a lender will want to see your DTI around 45% with the new mortgage calculated in.
- Do you need to raise your FICO score? A better score means better options for loans. Dave Ramsey is a talk show personality with some good ideas of how to become debt free. He advocates listing all debt in order from the smallest amount owed to the largest. Then, when paying bills make minimum payments on all but the smallest debt, for which you throw everything you can at it until it's gone. Repeat the process for each amount thereafter. A good lender can also help you with a plan to raise your score.
- Does your budget include putting money aside for an emergency fund? Whether you rent or buy, it’s wise to have at least 3 months of living expenses set aside.
- Do you have money saved for a down payment and closing costs? Depending on the loan most folks will need at least 3.5% down. But putting 20% allows you to waive paying for loan insurance, which will save you money! And of course, the more you put down the lower your monthly payment will be and the more you'll save on interest. You'll also need to cover the closing costs which are about 2% to 3% of the purchase price.