The excitement of first-time home ownership is so strong. Having a house is a dream of every person who exists in this world. But the home buying process can be confusing and complicated. Especially, when you are a first-time home buyer. So, if you’re planning to buy your first home as soon as possible then here are 13 tips for first-time home buyers. Read along.
As a first time home buyer you need to be extra careful and have an in-depth understanding of the processes involved. Searching for a house requires time, commitment and effort. You need to carefully weigh your choices given your current life stage and budget. Mostly, people purchase a house once in their life. So, it is exceedingly important to get it right by following tips for first time home buyers.
Here, I have given a few tips for first-time home buyers who are going to get their dream house soon. The house must be fairly future-proof in the sense that it should serve the needs and wants of your families for years to come in terms of living space, value as well as location. So, let’s get started.
Tips For First-Time Home Buyers
Are you planning to purchase your first home? As we already knew that getting new housing is a dream for many people, it requires a lot of hard work, diligence, and financial commitment. Here, I have given 13 tips for first-time home buyers to consider before getting your new home.
- Credit report.
Know what’s on your credit report. When you are ready to apply for a mortgage as a first-time home buyer, lenders will surely look at your credit score. The lender will also review your credit report to evaluate your balances, payment habits, and overall financial health that you have maintained. Remember, your credit and score both will help your lender to determine what interest rate you are eligible for.
Firstly, tips for first-time home buyers are to make sure you get the possible best rate, review your credit report regularly on time and adjust your habits accordingly such as to make payments on time. If you see any type of error in your credit report immediately report the credit bureau because it can improve your credit score. Generally speaking, the better your credit is, the lower your rate will be.
Set a budget, carefully review regularly your finances including your monthly debts and income so you get to know how much house you can afford. Let’s follow some general guidelines that I am going to mention below in this article.
If you’re debt-free, you may consider homes that are up to five times your total household income.
If more than 20% of your monthly income is used to pay down existing debts, then try to only shop for houses that are three times your income or less.
If less than 20% of your monthly income is used to pay down debt, then you may consider shopping for a home that is more than four times your income.
- Advance down payment
Importantly, save for a down payment in advance, it takes around 6.5 years for the average American buyer to save for a 20% down payment, so it is important to start saving early. Do consider setting up a dedicated savings account that is just for your home buying costs, and check into apps like chime and acorns, which can help you to automate the process for you.
Importantly, you should check your budget because the budget is the right choice for every first-time home buyer or infinite times. Identify where you are spending unnecessarily so you are able to cut back, and commit to putting those funds in a high yield savings account or you can say brokerage account. This could allow you to grow your funds more quickly.
- Hidden costs of homeownership.
Try to understand the hidden costs of homeownership. Once you get your suitable home as a first-time home buyer you will be responsible for more costs than just your mortgage payment. There are HOA dues, property taxes, insurance, utilities, and much more. Then it is possible that there are maintenance costs and repairs which often come by surprise.
Take the time to estimate these costs for sure before diving into buying a home as a first-time home buyer. Do check county records for an idea of what past property tax bills have been gone through. You can also get quotes from utility providers and few insurers that help you to estimate other expenses.
- Get pre-approved
A pre-approval is a letter-type document from a lender that shows you are approved for a mortgage for a certain amount. Including a pre-approval letter in your offer shows the seller that you are serious about buying a home as a first-time home buyer and it’s proof that you can actually afford the home and it may help you to win in a crowded war too. Importantly, always get pre-approved for a loan before beginning your home research.
- FHA, USDA, VA loans
Do check these programs that are FHA, USDA, and VA. If you can only afford a small down payment then FHA loans, USDA loans, and VA loans can be good options for you to consider. These require minimal down payments that can be zero in some cases and you can make purchasing a home a bit more that is affordable.
FHA loans, you can use them anywhere. While zero-down USDA loans are for use in rural areas people only. And VA loans, which also require down payments that are reserved for military members, veterans, and their spouses. Check once this program before diving into buying a home as a first-time home buyer.
- First-time home buyers programs.
Many state and city housing agencies have first-time home buyer programs that will help you to get lower the costs of homeownership. Some of them also provide down payment assistance, while others cover a portion of your closing costs. Remember, options may vary through the location, so reach out as much as you can to your local housing department for the proper guidance. Your real estate agent may also be able to help you to get your home as a first-time home buyer.
- Compare rates.
importantly, compare the rates from multiple lenders to get your suitable home. Remember, mortgage rates vary from one lender to another which makes shopping around a critical step in the homebuying process. You will want to get quotes from at least three to five different lenders, be careful to compare the annual percentage rate (APR), additional fees, and the total costs of the loan that are both upfront and over time.
- Stability of credit.
Keep your credit stable. Mortgage lenders want to see that your credit is stable or not, so avoid opening any new accounts or racking up credit card debt during the period of mortgage approval and underwriting process. Your lender will re-pull your credit as you get closer to closing, and any changes that are especially ones that indicate you are not good at managing your money could mean a higher interest rate or you can pay more fees.
At ninth, tips for first-time home buyers is to wait until after closing on your mortgage to open up any new credit accounts, and avoid making big-ticket purchases, like new furniture, etc, until after your loan is finalized.
Importantly, do not empty your bank account as there are a lot of upfront costs that come with purchasing a home, but don’t empty your bank account to pay for them. Incredibly doing so is risky and leaves you with little money to handle unexpected expenses. Instead, start focusing on saving money in a separate bank account from your emergency fund. It might take several years to save it all up, but once you have done you will have greater peace of mind, not to mention a financial safety net in case things go away.
Real estate agent.
Get a real estate agent as he or she will help you get the best home as a first-time home buyer. When it is possible entirely to buy a home sole it is not advisable for at least your first time round experience. An experienced agent will help you vet neighborhoods and homes, schedule tours, draw up contracts, negotiate, and much more. By asking your family members, friends, and colleagues for agent recommendations in your area, and be sure to interview at least a few. You want to make sure that they are a good fit before deciding to work together.
- Home inspector.
Find a good home inspector. A good home inspector is another good partner to have. For a few hundred dollars, they will inspect the home and look for any safety hazards that need and want to be repaired. Then, You can use their findings to renegotiate with the seller and ask them to make the noted repairs or give you the funds to do it by yourself. Getting a quality home inspection is not so easy to ensure you buy a safe house for yourself that is a well-maintained property that’s worth the money you are paying for it.
- Vet the neighborhood.
Vet the neighborhood, your neighborhood, and your neighbors can make or break the experience as a home buyer. When you find the home of your dreams then make sure to walk to the neighborhood. Talk to the people out in their yards and get a feel for what type of community is like. Must research crime rates, neighborhood amenities, and school quality. And knowing how close it is to things like your work, playgrounds, grocery stores, and other must-have facilities is important too.
Purchasing a house for the first time is exciting. However, if you do some homework before getting your dream house it will fulfill your expectations. In this above article, I have given 13 for first-time home buyers to go through them and grab their dream house. I hope you get all the information you need. Thank you! Want to get some guidance before availing of a loan then read along with this article that tips before getting a loan.