5 Tips for First-Time Home Buyers
Buying a home for the first time is an exciting experience. And as one of the biggest financial decisions you could make, requires careful and thoughtful planning, preparation, and research.
Here are five tips to help you navigate the process smoothly and make the best decisions.
1. Determine your budget.
Before you even begin hunting for your perfect house, it’s important to determine what you can afford. Your income and expenses, any debt and especially your credit score will all contribute to your final numbers.
A good rule of thumb is not spending more than 30% of your monthly income. Even though it can be tempting, don’t stretch yourself thin with your dream home as this could cause you and your family financial difficulty.
There are many other costs associated with a home purchase that are not widely known to first time homeowners such as home inspections, any repairs that might need to be done, property taxes, insurance, and future maintenance. Using an online mortgage calculator can give you an idea of what your monthly payment could look like.
2. Know your credit score.
Your credit score is one of the most important factors that lenders will use to decide if you qualify for a mortgage loan and what types of interest rates you’ll be offered. Your score is made up of your credit history, debt, and whether you pay your bills on time. From a high of 850 to a low of 300, lenders usually consider credit scores 650 and above to be good. Knowing and understanding you credit score will give you an advantage. You can easily obtain a free credit report that will include your credit score and history from the three major credit bureaus. It’s always a good idea to improve your credit score, especially if it’s closer to the lower end, as a good score can save you thousands of dollars in interest over the life of the loan, as higher scores generally lower your interest rates.
3. Understanding your personal mortgage loan options, rates, and pre-qualification.
Conventional loans are the norm, but they aren’t the only option for home buying. FHA and VA loans could be a consideration among others.
Lenders will often offer either a Fixed Rate or Adjustable Rate. Knowing what type of loans (and interest) rates you qualify for is important before you even begin looking through house listings.
Talking to a mortgage lender about getting pre-qualified for your mortgage loan will help make the process easier and help you to determine how much you can finance. This way, you’ll know the parameters for your house search. Being pre-approved also shows sellers that you’re a serious buyer.
A downpayment is another powerful way to lower interest rates and secure a mortgage. Most lenders require a percentage of the purchase price of the house upfront. The money you can put down, the better your chances of approval with terms in your favor. Downpayments of 20% of the purchase price will give you a strong advantage.
4. How to make the best, educated decisions.
Do your research. Scout out the neighborhoods and communities in the areas where you’re considering purchasing your home. Key factors to consider are how long it will take to commute to work, the proximity to schools, and amenities like parks, community centers, shopping, and other recreations. Look up the property values in the area and check crime rates. Several websites offer unbiased, neighborhood reviews.
Now when you’re attending open houses and scheduling house tours, you’ll be prepared and knowledgeable about what you need and what you’re looking for. Taking notes and photos during these visits are a great idea to remember important information and questions you may want to ask later.
Don’t feel pressured to put in an offer right away. And be cautious about deciding based on emotion. Take a little time to think it through before making up your mind.
5. Have a good real estate agent by your side.
You don’t have to do this alone. A good real estate agent will help guide you through the process of buying your home while having your best interests at heart. They can find homes that meet your criteria, negotiate sales terms when you’re ready to put in an offer, and assist you through all the paperwork and legal aspects. Your representing agent will offer advice, answer questions, and help you negotiate the seller’s asking price.
Buying your first home is a cause for celebration and joy! Having your research done and finding the right agent to partner with will make the process smoother, reduce stress, and help you manage the challenges.
Call or email us to schedule a consultation today.
Happy house hunting!