Buying your first home is exciting. Unfortunately, buying your first home can also be stressful. First-time home buyers should consider these helpful tips to help make the process easier.
1Start Saving Money Early
When you start to think about buying a home, one of the first things you’ll want to do is start saving money for a down payment. Buyers who put more money toward a down payment can often secure a lower interest rate since putting more down lowers the risk of loan default. You may also need to purchase private mortgage insurance if your down payment is lower than 20%. Your loan type will also determine how much of a down payment you need.
Your main cost will probably be your down payment, but don’t forget to factor in the additional upfront costs of a home purchase beyond the down payment. You will need to have money saved for these costs as well:
- Attorney fees
- Inspection costs
- Appraisal fees
- Moving costs
It is also a good idea to have a couple of months of mortgage and living expenses saved before you purchase your first house. You don’t want to move into your new home with an empty bank account.
2Get Your Credit in Order
Your credit score will be a primary factor in determining if you can get approved for a mortgage and what types of loans and interest rates you might be able to secure.
You want to make sure you are paying your bills on time when you know you will be applying for a mortgage. You should pay off credit card balances and keep balances down to lower your debt-to-income ratio. It also is not a good idea to apply for any new lines of credit during this time. Other new loans or credit accounts that appear during the home buying process put your final loan approval at risk.
3Research Mortgage Types
When you buy your first house, you may be eligible for particular loans and programs that offer lower interest rates and require little or no down payment.
There are several types of mortgages available to people who are purchasing a first home. Each option may have specific eligibility guidelines for both the buyer and the property. For example, banks might require the property to be a primary residence for a first-time Utah home buyer. In addition to varying eligibility, these loans will also have different interest rates, down payments, fees, and insurance requirements associated with them.
Government agencies do not guarantee conventional mortgages, so they require private mortgage insurance. Down payments on these loans can range from 5% – 20% of the home sale price. These mortgages often come with stricter financial requirements.
The Federal Housing Administration insures FHA Loans. These mortgages typically have lower financial requirements and smaller down payment minimums than conventional mortgages.
The Department of Veterans Affairs guarantees VA loans. These mortgages usually do not require a down payment. You might qualify for a VA loan if you are a current military service member or veteran.
You should ask your lender about the loans and programs that might be available to you as a first-time homebuyer.
4Get a Pre-approval
A mortgage pre approval is an offer from a lender to loan you a set amount of money under specific terms. The financial information you provide, such as bank statements, tax documents, and your credit score, help to determine your offer. You should secure a pre approval before you start shopping for your first home.
One reason to get a preapproval is that it will help you set a price range as you begin looking at houses. When you know the maximum amount a lender is willing to give you, you can exclude properties over that amount from your search.
Mortgage pre-approval is also an essential step in preparing to make an offer on a house. You can show sellers that you are a serious buyer who can secure the funds needed for the amount of the purchase. In a competitive market where sellers receive multiple offers, you can quickly lose the property if you do not have a loan pre approval.
5Set a Budget
It might be tempting to buy a house at the very top of your pre approved loan amount, but you should be careful about overextending your actual budget. It is a good idea to go through all of the actual costs of owning a home beyond the monthly mortgage payment.
When you calculate how much you can spend on a house, you want to consider both upfront and recurring costs. Think about the costs of utilities, property taxes, homeowners insurance, and any regular upkeep on the property. Also, take your income, debt, and other bills and expenses into consideration.
Lenders will help you calculate how much loan money you qualify for, but make sure you understand how much you can spend on a home and how much you can budget for mortgage payments each month. If you stretch to buy a house that doesn’t fit into your budget, you can be risking financial hardship in the future.
6Find a Good Real Estate Agent
Real estate agents should understand all aspects of the home-buying process and have insight into local housing markets. A good realtor can provide many different services to help guide you through your house purchase:
- Help you find properties that fit your needs and your budget
- Provide guidance on how much to offer for a property
- Complete and submit offer letters and contracts for you
- Help with negotiations once you make an offer
- Ensure that your home purchase runs smoothly through the entire process
You should get some recommendations for realtors and choose one that is the best fit for you. A first-time home purchase can feel overwhelming at times. Find someone who knows your area well and can help walk you through the buying process from start to finish.
7Hire an Inspector
Once you have an offer accepted on what seems like the perfect house, you should hire an inspector to make sure the property meets all of your expectations. Some loan types require a home inspection, but it is a good idea to have one done regardless of your mortgage requirements. You want to be confident that you are buying a safe home without any major repairs needed.
An inspection will be part of the closing process. Your inspector’s job is to find any issues that you might want to address before you complete the purchase of a home. All structural and mechanical aspects of the property, such as the foundation and the electrical, plumbing, and heating systems, should be inspected. You can then request that the seller either take care of any problems found or deduct the cost of repairs from the house’s purchase price. Your real estate agent should also help with these negotiations.
When you start thinking about buying your first house, the process can seem complicated and confusing. These tips will help you begin to take control of the process and set you up to be a successful first-time homebuyer.
How To Do Flower Decoration In Most Stunning Way