Apr 25in GENERAL
Tips for First Time Home Buyers
We all dream of that moment when we buy our own new home. The feeling of independence, achievement, and happiness all in one. Thinking of the idea seems so easy, but it can be a very stressful process.
We wanted to make things easier for you, so we want to share a list of tips that will make your experience easy and smooth.
It’s common to put 20% down, but many lenders now permit much less, and first-time home buyer programs allow as little as 3% down. But don’t forget that the more you put down, the less your monthly payment will be.
Before you start looking for your dream home, you need to know what’s actually within your price range.
When you’re taking out a mortgage loan, your credit will be one of the key factors in whether you’re approved, and it will help determine your interest rate and possibly the loan terms.
Every time you open a new credit card or take a loan, your credit score seems to fall. Make sure that during this time period, you pause on that and focus on strengthening your credit score.
In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage, which can be significant. Closing costs generally run between 2% and 5% of your loan amount. You can try and get your seller to pay a portion of that closing cost instead of lowering the price of the house.
Purchasing your home is not the only thing you need to save up money for. You also need to take into consideration furnishing your new home and adding all appliances needed. So you have to save, save and save!
You may assume you’ll buy a single-family home, and that could be ideal if you want a large lot or a lot of room. But if you’re willing to sacrifice space for less maintenance and extra amenities, and you don’t mind paying a homeowner’s association fee, a condo or townhome could be a better fit.
Is a 30-year, fixed rate mortgage a given, or is another loan type right for you? If you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan. Or you may prefer an adjustable-rate mortgage, which is riskier but guarantees a low interest rate for the first few years of your mortgage.
It’s always good to check your options. Get more than one quote from lenders and compare rates. This might save you some money.
You can get prequalified, which simply gives you an estimate of how much a lender may be willing to lend based on your income and debts. But as you get closer to buying a home, it’s smart to get a preapproval. Having a pre-approval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step.
You’ll be working closely with your real estate agent, so it’s essential that you find someone you get along with well. To get better results, they should be highly knowledgeable about the area and homes you are searching for.
As your agent shows you homes, look for properties that cost a little less than the amount you were approved for.
Finding the right neighborhood is just as important as locating the right house. Research the schools, even if you don’t have kids, since that affects a home’s value. Look at local safety and crime statistics. How close are the nearest hospital, pharmacy, grocery store and other amenities you’ll use? Also, drive through the neighborhood on various days and at different times to check out traffic, noise and activity levels.
It’s easy to look at properties that meet your current needs. But if you plan to start or expand your family, it may be preferable to buy a larger home you can grow into. Consider your future needs and wants and whether this home will suit them.
It’s rare to find a house that’s perfect in every way, so think carefully about what you’re willing to compromise on and what you’re not. Perhaps no walk-in closet in the master bedroom is a deal breaker, but an outdated guest bathroom will be tolerable until you can renovate it.
Your real estate agent can help you with this but consider how much under or over the asking price you’re willing to pay to obtain your dream home.
A lot can be up for negotiation in the homebuying process, which can result in major savings. Are there any major repairs you can get the seller to cover, either by fully handling them or by giving you a credit adjustment at closing? Is the seller willing to pay for any of the closing costs?
Before you close on your new house, your lender will require you to buy homeowners insurance. Shop around and compare rates to find the best price. Look closely at what’s covered in the policies; going with a less expensive policy usually means fewer protections and more out-of-pocket expenses if you file a claim.
Once your offer is accepted, you’ll pay for a home inspection to examine the property’s condition inside and out. But not all inspections test for things like radon, mold or pests, so be sure you know what’s included. Make sure the inspector can access every part of the home, such as the roof and any crawl spaces. Attend the inspection and pay close attention. Don’t be afraid to ask your inspector to take a look — or a closer look — at something and ask questions.