With over 35% of American households renting rather than owning their home, it’s important to understand what you’re getting into when buying your first home. Purchasing your first home is an exciting event, and it is vital to be well-prepared for this journey.
Here are some first-time homebuyer tips to consider before starting the process.
Your Financial Position
The first thing you need to do is check your credit score. You need a good credit history to qualify for a home loan.
To understand this, obtain your records from the credit agencies and study them. You can request these records for free.
A credit score is based on the amount of credit that you have. This includes overdrafts, credit cards, and other lines of credit that you have and how much of that you are using currently.
If you have to work on improving your score, start by paying off some debt to keep your credit balances low.
Ensure that you pay all bills on time, as this is also reflected in your credit history. In addition, a good credit score will allow for a better interest rate on your home loan.
Start a Savings Account
There are additional expenses to the initial purchase price of the home that you have to take into consideration and save for.
A down payment is the money you pay upfront. This depends on the type of mortgage you choose and can vary according to the lender’s requirements. Start saving early for this, as even a small down payment can impact your budget significantly.
Closing costs are often forgotten. These are additional expenses that you have to pay upfront when a mortgage is finalized. This can range between 2% to 5% of your loan amount, and it is a good idea to establish this amount before any financial commitment.
Some of these closing costs can include the following:
- Appraisal fees
- Attorney fees
- Inspection fees
- Escrow fees
- Insurance
Remember to allow for moving costs in your budget and factor this into the amount you need to have available in a savings account. Then, you can approach a moving company for a quote that covers every detail of your planned move. If you plan to do this yourself, consider expenses such as packing material, van rental, and storage.
Here are some additional expenses to consider when moving into a new home.
- Any cleaning costs
- Any expenses such as painting or repairs that need to be done
- Connection of phones and internet
Do Research
Research will be your best friend when you’re looking at homes that are for sale.
Check if there’s any assistance available for first-time home buyers in your area. For example, you may have access to down payment assistance, tax breaks, or a Federal Housing Administration loan.
You should also research the different state programs available to assist first-time home buyers to see if you qualify for any of them. Then, if you meet the criteria for these programs, apply online or in person as required.
You should also research the area you’re looking to buy a house in. The neighborhood can influence many of your decisions, so make sure you visit the various areas during different times of the day to help you narrow down where you want to live.
Consider the property prices in the areas as well as the property taxes. Also, look at the availability of amenities such as schools, parks, clinics, or public transport. If you rely on a specific amenity, ensure it’s available in the area.
If you’re struggling to narrow down your options, consider enlisting the help of a professional sales agent. They will assist you in making the best choice financially, considering your needs and wishes.
Determine Your Budget
Deciding what you can afford is an essential step in becoming a homeowner. This must include recurring costs you need to cover in addition to your mortgage.
Here are some examples to keep in mind:
- Property taxes
- Utility bills
- Insurance
- HOA fees
- Maintenance and repairs
Mortgage Loan Applications
Shop around for the mortgage loan that suits your needs the best. There are different products on the market, such as:
- Conventional loans
- Government-insured loans
- Jumbo loans
- Fixed-rate or adjustable-rate loans
Conventional loans are an option for borrowers with a good credit rating.
Government-insured loans are a good option for borrowers with a lower credit rating and limited cash reserves for a down payment.
Jumbo loans are an option for borrowers with high credit ratings.
Fixed-rate or adjustable-rate loans let you choose an option that will work for you throughout the term of the loan. With a fixed rate, you know what your monthly payment will be and that it will stay the same throughout your repayment period.
You can also get pre-approved for a mortgage. This allows you to know exactly what you can afford. If you have a pre-approval letter, you can make an offer with the knowledge that you can afford the home, and the seller knows that you are serious when submitting an offer on a property.
First-Time Homebuyer Tips Made Easy
Making a significant investment, like buying a home, can be incredibly daunting, especially if you’re doing it for the first time. That’s why first-time homebuyer tips are necessary if you want to make this process as smooth as possible. So don’t be afraid to buy a home!
If you have questions about being a first-time homebuyer, contact Brett McCurdy. Get help with buying, selling, investing, or managing real estate with guidance from your local licensed real estate broker.