Homebuyers

Hoping to Buy Your First Home? How a Homebuying Assessment Can Help You Achieve Homeownership

Buying a home may be the largest purchase you will ever make. And whether you are months—or years— away from closing on a home, it's never too early to start preparing.

That's why a homebuying assessment can be your secret weapon for success.

Last year, first-time buyers made up about a third of buyers, despite the affordability challenges they faced, according to the 2024 Home Buyers and Sellers Generational Trends Report by the National Association of Realtors (NAR). That was up from 26% in the previous year.

Millennials made up 38% of all buyers, while members of Gen Z accounted for 3% of buyers, according to the report.

Given these trends, it's clear that younger adults are serious about owning their homes. But how do you join their ranks without unnecessary stress and financial missteps? That's where a homebuying assessment comes in.

The assessment is a thorough evaluation by a loan officer that is designed to set you up for homebuying success. Typically, it involves a deep dive into your finances, including your credit score, savings, income, and any existing debts.

During the assessment, your loan officer might help you to create a budget, identify potential roadblocks, and explore available loan options. You'll also get a clearer picture of how much house you can afford and what steps you need to take to improve your financial standing.

Think of it as a personalized roadmap that is tailored to your unique financial situation and homeownership goals. The assessment will help you understand exactly where you are on the pathway to homeownership.

"I have not seen many people prepare for the biggest milestone in their life in 30 days," says Mosi Gatling, senior vice president of strategic growth and expansion at New American Funding. She is also a Las Vegas-based loan officer. "The more time you give to the process to know the twists and turns, the better the outcome."

Why is a homebuying assessment essential?

A homebuying assessment, ideally, should happen no later than six months to a year before you're ready to buy. This gives you enough time to prepare financially, set your goals, and understand exactly what you need to do to get the keys to your new home.

The goal is to help homebuyers get pre-approved for a mortgage.

Pre-approval involves a lender reviewing your finances and providing a letter that states how much they are willing to lend you.

This letter shows sellers that you're serious, and it also helps you know what you can afford. In a competitive market, pre-approval can be the difference between getting the house you want and missing out.

Saving for a down payment on a home

Saving for a down payment is often the most challenging step for many homebuyers. 17% of all buyers identify it as the biggest hurdle, according to the NAR report.

The median down payment across all buyers was 15%, according to NAR. It was much lower for first-time buyers, who put down a median 8%.

A homebuying assessment can help you identify any available down payment assistance programs that may speed up the process or give you a clear understanding of how much you need to save. This can make your path to homeownership more achievable.

"Saving can be challenging. However, starting early to identify how much you need allows a professional to help you leverage down payment programs to aid in achieving the goal," said Gatling. "It's like having the blueprint for how much you need to have ready to buy a home."

Why your credit score matters

Your credit score becomes extremely important when you're buying a home.

It's one of the first things lenders look at to determine whether you will be approved for a loan and how large that loan will be. Buyers with higher credit scores may be able to snag lower mortgage rates, which can save them money each month on their mortgage payments and through the life of their loans.

In 2023, the average FICO® Score was 715, according to Experian. Millennials had a lower average score of 690.

Most lenders want to see a score between 620 and 640 to approve a mortgage. If your score is above 716, you're more likely to get more advantageous terms on your loan.

A homebuying assessment can help you see where your credit stands and learn what you can do to boost it before you apply for a mortgage.

"Credit plays a major role in not only qualifying for a mortgage program, but it dictates your rate...and cost of mortgage insurance," said Gatling.