After months – maybe years – of preparation, you’ve decided to finally go for it and purchase your first home. Congratulations! This is a very exciting time for you, but it is important to never let the anticipation of being a first-time home buyer get in the way of making crucial decisions in the buying process. Although purchasing your first home is an amazing experience, it can also come with some challenges. With some tips and first-time buyer knowledge, the task can be less daunting and all the more exciting.
1. Determine your budget
The very first thing every first-time home buyer needs to determine is what he or she can afford. That will make your search significantly more effective. When calculating your budget, include all additional costs, such as insurance premiums, homeowners insurance, property taxes, HOA fees (if applicable), etc. Once you have determined your budget, you will know which homes are within your reach.
2. Determine where you stand with lenders
To make the buying process easier, know where you stand with lenders. If you have a credit score of 720 or above, you can shop around for a loan with the lowest interest rate. However, if you have a lower credit score, you may be restricted to higher rates. There are still many promising options available, but this could certainly increase your budget.
3. Consider cost-saving moves
As a first-time buyer, you want to get as much bang for your buck. There are several potentially cost-saving moves you may be interested in. Look for properties that are in foreclosure, or shop in neighborhoods with a high number of properties for sale to get the highest value for your dollar.
4. Determine your requirements
You are likely going into the home buying market with an idea as to what you’re looking for. Carefully consider the kind of home you want, and separate the needs from the wants. This will narrow down your search for a more effective home buying process.
5. Consider your potential down payment
As a first-time buyer, you probably have some funds set aside to make a down payment on your dream home. It is recommended to have approximately 20% of the purchase price available. However, there are several loan and mortgage programs that can help you make a down payment for significantly less. Know your options before you get started.
6. Hire a local agent
If you’re interested in owning a home in a specific area, connect with a local real estate agent that is familiar with that area. He or she will have invaluable experience and knowledge about the neighborhood and local matters such as schools, new developments, and any issues.
7. Assess your preferred neighborhood
A neighborhood may be beautiful on the outside, but it is highly recommended to actually find out more about it before deciding whether it’s for you. Assess your preferred neighborhood by visiting it at different times, such as the weekends, late evenings, and rush hour. This will provide you with valuable information on a variety of factors such as traffic conditions, safety, proximity to grocery stores, and more.
8. Have your credit ready
Purchasing your first home is one of the biggest financial decisions you will make, and you want to be prepared. Gather necessary documents, such as your credit report, and identify any problems with your finances so you can fix them ahead of time.
9. Wait on any large credit purchases
As a first-time home buyer, it’s important to hold off on any large credit purchases, such as a lease or car loan, as it can impact your debt-to-income ratio. This number will directly affect whether you qualify for a loan. So, if possible, wait to make any large purchases with credit.
10. Season down payment funds
Some lenders require a seasoning of your funds, which means that your down payment must be in your account for a set amount of time. It’s crucial to know these conditions to ensure that the closing on your dream home isn’t delayed.
Now that you have these top 10 tips under your belt, it’s time to check out the housing market and find your dream home!