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Preparing to Buy a Home

Buying a new home is an exciting time in anyone’s life. With careful planning, research, and some help from the right people, the process of buying your first house can be all that you hoped for.

Things to know:

  • Getting prequalified or preapproved through a lender is a good way to figure out affordability.
  • To get preapproved, you will need to submit information that shows lenders your ability to pay back what you borrow.
  • There are four main costs to buying a home: the down payment, closing costs, prepaid charges such as real estate taxes and insurance, and moving costs.
  • When shopping, compare home prices with the prices of similar homes in the same neighborhood.
  • Here are ESL's five steps to get a mortgage.
  • What Can You Afford

    Many people are shocked to learn how expensive it is to buy a home. One of the most important things to do before buying a house is to prepare financially by saving enough money to cover the initial costs and to create a financial cushion for the ongoing expenses.

    Start with your budget:
    Budgeting is the best way to get a solid handle on what you can truly afford. Budgeting helps you accomplish two goals: staying in control, and seeing the big picture. Identifying a budget prior to house hunting will help you achieve these goals over the long term. To learn more, check out our Budgeting page.

    How much is too much?

    There’s nothing more frustrating in the home buying process than falling in love with the “perfect” home only to learn that it’s out of your price range. A good way to figure it out is to get prequalified or preapproved, but here’s a quick formula that will get you in the ballpark:

    Affordability Estimate
    Affordability EstimateYearly gross income (before taxes) x 2.5 = maximum affordable home price
    Example$45,000 per year x 2.5 = $112,500

    Keep in mind that there are opportunities available that can improve your affordability such as grants offered by community programs.

    Why prequalify?

    Prequalification considers your credit and existing debt and gives you an idea of how much mortgage you are qualified to hold. This is very helpful information when looking for a home, and it’s free. Your budget and prequalification amount help you develop clear expectations regarding home price ranges.

    Consider if preapproval is right for you:

    Preapproval is a more extensive process where the lender commits to provide you the loan. To get preapproved, you will need to submit information that shows lenders your ability to pay back what you borrow. To figure this out, lenders will look at your income (pay stubs and tax returns), your assets (savings and checking account statements), your payment history (credit report), and maybe more.

    ESL strives to simplify the mortgage process. Here are our five steps to get a mortgage.

  • Costs
    Buying a home takes commitment and sacrifice to save for everything involved. There can be varied costs depending upon a number of factors, but there are four primary categories of costs to prepare for when buying a home:
    Earnest Money
    Down Payment
    Closing Costs
    Post Purchase
    Earnest MoneyEarnest money is a deposit you make with a purchase offer that shows the seller you are serious about wanting to buy the home.
    Down PaymentOptimally 20% of the purchase price. Often much less (3% to 5%), but then Private Mortgage Insurance is required.
    Closing CostsTypically 3% to 6% of the purchase price: Loan processing fees, appraisal fees, credit report fees, mortgage insurance, hazard insurance, and title insurance, recording fees and surveyor fees, and up-front property taxes.
    Post PurchasePaying for movers or a moving truck, buying items for the house, paying for storage if needed, buying tools, etc. Reserve funds for unexpected expenses such as repairs.

    For a more comprehensive breakdown of costs you can expect, view Saving for Home Ownership.

  • Shopping & Grants
    Shopping for a home:

    One of the best places to get started shopping for a home is on the Internet. By using trustworthy real estate websites, you will develop an idea of what’s out there. Here are a few good places to start:

    Finding the right value:
    When shopping for a home, it’s important to stay focused on what’s truly important to the true value of the property. Here are the top elements that affect the value of a home:

    1. Location – Compare the price of the home to the selling price of similar homes in the same neighborhood. Most homes will never resell for much more than the average price in the neighborhood in which  they are located.
    2. Square footage – A large footprint almost always means a higher value.
    3. Condition – Remember to look at everything including the roof, chimney, gutters, siding, windows, doors, landscaping, foundation, flooring, plumbing, electrical, furnace, air conditioner, and hot-water heater.
    4. Updates and layout – How updated are the kitchens and bathrooms? What is the overall layout of the rooms – open or segmented?
    5. Added features – Are there any special features that enhance the home?

    Take a look at the Home Buying Checklist for a helpful tool to evaluate homes when you shop.

    The good news is you can get help saving for the down payment and closing costs for your first home. The First Home Club is a program that provides income eligible participants a grant of up to $7,500 through a match of $4 for every $1 that you save in a special account. Take a look at the First Home Club program write-up for more information about eligibility and getting started.

    Additionally many local governments including the City of Rochester and Monroe County offer down payment and closing cost grants for eligible first-time homebuyers. Check with your local authorities for more information.

  • On Your Side

    Any time you enter a situation that’s new and challenging, it’s always reassuring to know that there are people on your side. When it comes to buying a home, these are several individuals you can turn to at each stage of the process:

    LookingListing Agent
    Buyer's Agent
    Lender (for prequalifying)
    NegotiatingListing Agent
    Buyer's Agent
    Home Inspector
    Real Estate Attorney
    Real Estate Attorney

    A Home Ownership Counselor is a trained professional who works for a non-profit agency to provide classes and counseling to teach you about the home-buying process and helps you overcome any barriers along the way.

    A Real Estate Agent is a person who is licensed by the state and has been trained to facilitate the buying and selling of houses. They make money by taking a commission from a home's selling price. There are two primary types of agents:

    1. A Listing Agent works for sellers of homes to help them get the best price.
    2. A Buyer’s Agent works for buyers of homes to help them find a house that fits their needs.

    A Lender helps you get a loan for your home – known as a mortgage. Having an established relationship with a trusted lender helps you in getting approved for the right loan.

    A Real Estate Attorney specializes in real estate law and makes sure the transaction for the property is done correctly. They work to protect your interests and settle disputes on your behalf. It’s important to shop around and find someone you can trust.

    A Home Inspector conducts a basic examination of the condition of the home you want to buy. They create a written report of their findings and describe any major problems that might have been discovered.

    An Appraiser is hired by the lender to estimate the fair market value of the house you want to buy based on comparisons with other houses that sold recently in the same area. Lenders use this appraisal to determine how much they are willing to lend you.

    To learn more about the people involved in the home-buying process, view Your Homeownership Team.