Buying your first home comes with a number of significant decisions, and it can be as intimidating as it is exciting – so we’ve compiled a list of 10 first-time homebuyer tips to help you navigate through the process.
1. Make sure you’re ready to commit to a mortgage
The two most popular loan terms in the U.S. are 15-year and 30-year fixed options. Even though you don’t need to live in your home for that amount of time, purchasing a home is still a huge responsibility. You need to be absolutely certain that you are ready for homeownership before committing to a mortgage.
2. Get preapproved
A mortgage preapproval is an official document that demonstrates how much a lender is willing to let you borrow. This is based on your financial information such as bank statements, credit sore and W-2’s. Many sellers call for a mortgage preapproval before accepting an offer.
When househunting, a preapproval letter informs sellers how serious you are about buying. It also facilitates the home selling process — the sooner you can get approved for a mortgage the quicker the home gets sold.
3. Uphold your credit
When shopping for a home, it’s not the best time to open a new line of credit. When applying for a mortgage, lenders run a credit report and once more before closing. It might risk your final approval
Be sure to make your payments on time and don’t begin any risky spending. Lenders want to see that your spending habits are consistent and can be relied upon for future payments.
4. Know your loan options
The loan type you decide to go with will determine your down payment amount and what kind of home you can purchase. Here are some of the most popular loan options:
Conventional Loans: the most common type of home loans. Borrowers can purchase a home with as little as 3% down.
FHA Loans: Allows borrowers to purchase a home with less strict financial and credit score requirements. Some borrowers can get an FHA loan with as little as 3.5% down and a credit score as low as 580.
VA Loans: These are exclusively for veterans, members of the armed forces and National Guard. These borrowers can purchase a home with 0% down.
5. Save for a down payment
Saving up for a down payment is a huge step toward purchasing a home. It requires discipline to put the money aside. It’s wise to carefully consider where best to hold the money for you down payment and choose the option that aligns with your priorities and needs.
It’s a good idea to sit down with a mortgage lender who will let you know much of a mortgage you can qualify for so you can have an idea of how much to save up for a down payment. Feel free to schedule a call with one of our licensed Loan Officers to discuss your home finance goals.
6. Remember the closing costs
Closing costs are expenses that go to your lender in exchange for arranging your loan services. Some common closing costs might include:
- Pest inspection fees
- Attorney fees
- Escrow fees
- Appraisal fees
- Discount points
- Title insurance expenses
Your exact closing costs will be located on a document called Closing Disclosure. Typically, you can expect to pay 2% – 5% of your total loan cost in closing costs.
7. Make a list of needs, non-negotiables and nice-to-haves
Take some time to come up with a list of qualities you want and need in your new house. This will let you shop for your dream home more effectively and compare houses with less stress.
8. Hire a real estate agent
Hire a real estate agent to help find your dream home. Realtors are local experts in the home buying process and your local market.
Realtors can assist in the home buying process by showing you properties that fit your budget and needs. They will attend showings with you to learn more about your priorities as a first-time homeowner. Realtors also help you negotiate with the seller or seller’s agent after submitting an offer.
9. Hire an inspector
The inspector will inform you about the specific problems with the home. The results will tell you everything you need to know about the home and use the information to request concessions from the seller.
10. Stick to your budget
Some first-time homebuyers get too emotionally invested in a home only to find out it’s out of their budget. The right home is out there, be patient and keep hunting until you come across a home that fits your budget. You’ll also want to factor in the funds for repairs or renovations.