TIPS FOR FIRST-TIME HOME BUYERS
By Jessica Hudson | June 1, 2019
Buying a home can be nerve-racking, especially if you're a first-time home buyer. These tips will help you navigate the process, save money and avoid common mistakes.
Start saving for a down payment and closing costs early
If you qualify for a VA loan or a USDA loan, you might not have to put any money down, but for most home buyers, it will require at least 3% - 5% down. On most loans, putting down 20% will save you on costly mortgage insurance, but even a small down payment can be hefty. For example, a 5% down payment on a $250,000 home is $12,500. Closing costs can also add up and almost be as much as your down payment. There are options to minimize closing costs, so be sure to ask your lender about your options.
Determine how much home you can afford
Before you start looking for your dream home, you need to know what's actually within your price range. A mortgage lender will be able to go over all of your mortgage options and determine your loan limit based on your income and debts.
Check your credit report
When applying for 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. Check your credit report (and your spouses', even if they will not be on the loan) before you begin the home buying process. Dispute any errors that could be affecting your score and look for opportunities to improve your score. Check out our article here: Tips to improve your credit. You will also want to put a pause on opening any new credit lines as this will add to your debt and lower the amount you can borrow for your home.
Get a pre-approval letter
The lender will thoroughly examine your finances and credit and confirm in writing how much they are willing to lend you, and under what terms. Having a pre-approval letter in hand makes you look more serious to a seller and can give you an upper hand over buyers who haven't taken this step.
Hire the right buyer's agent
It's imperative that you work with a knowledgeable real estate agent in your area. The cost for the agent is already figured into the cost of a home. A realtor's commission is not paid out of your pocket, the seller pays the fee to their agent as well as yours. We work with highly experienced realtor partners if you are in need of a referral.
Pick the right type of house and neighborhood
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 now that you can grow into. Consider your future needs and wants and whether the home you're considering will suit them. You'll also want to be sure to thoroughly examine the neighborhood. Research nearby schools, even if you don't have kids, since they affect home value. Look at local safety and crime statistics. Map the nearest hospital, grocery store, and other amenities you'll use. Drive through the neighborhood on various days and at different times to check out traffic, noise and activity levels.