If you plan on buying a home for the first time and are feeling a little overwhelmed, you are not alone. Buying a home is the most significant financial decision many people have ever made.
It makes sense to cautiously approach the process and strive to learn as much as possible before you finally pull the trigger. Fortunately, there is a lot of good advice available to help you navigate the buying process.
Do your research, find tips that apply to your situation, and strive to make decisions based on what is best for your specific needs.
1. Start Saving For Your Down Payment as Soon as Possible.
One of the essential things to do when buying a home for the first time is to plan your finances in advance! Putting a down payment on a home is a big undertaking. Considering the price of most homes today, it will probably take you some time to save enough money for a down payment of any significance.
Of course, you may not necessarily need a big down payment—some mortgage programs let you pay as little as 3% down. But keep in mind, the more you pay down, the better your financial situation will likely be.
You need to hit 20% down to eliminate private mortgage insurance, for example, which can be challenging to do. The sooner you start saving for the down payment, the better.
If you are not familiar with PMI, it is a fee you pay a lender when you don’t have a twenty percent down payment.
Many first-time buyers do not realize you can get a down payment gift as well that can be used toward the purchase.
2. Decide How Much You Want to Spend.
A significant step when buying a home for the first time is creating a budget. There are plenty of home buyers out there who got approved for big mortgages and maxed them out—then regretted their decisions for years to come.
Just because a lender is willing to give you the money does not mean you can actually afford to carry a big mortgage.
There are a lot of costs to owning a home that you need to consider. You also want to be sure that you can take care of other financial needs, like savings and retirement, while still paying your house payment.
3. Check & Improve Your Credit Score Before Buying a Home & Pay Off Your Debts
Your credit score can greatly affect the financing options and the interest rate you have when buying a home. It is important to note that the interest rate you receive can impact you financially for many years to come.
Before becoming a first-time home buyer, it makes sense to achieve a good credit score first. If you don’t have the best credit, it might make sense to hold off on buying. The significance of having an excellent credit score before purchasing your first home cannot be understated.
Another significant first-time home buyer tip is to get your financial house in order before buying. If your credit score is not high right now, you might be better off taking some time to improve it before you get a loan. There may be errors on your report that need to be corrected, which can take months.
If you have significant debts such as student loans or other high-cost mortgages, it will make sense to get them paid down. It is advisable to have minimal debts when purchasing your first house. If you have high credit card bills, take care of them.
4. Get Mortgage Pre-approval Done Early.
One of the more vital things a first-time homebuyer should do is get pre-approved for a mortgage before looking at homes. Many buyers get confused by the difference between pre-qualification and pre-approval. Getting pre-qualified for a mortgage is a quick, relatively painless process requiring only a few essential information points.
Pre-qualification is easy to acquire but is practically useless when you really want to buy a home.
Sellers want pre-approval, not pre-qualification. Pre-approval requires going through most of the process of getting an actual mortgage. But going through all that effort gives you a letter that says you are very likely to get the mortgage as long as nothing significant changes with your credit or you lose your job. A pre-approval letter is a must when you are shopping in a competitive market.
5. Hire a Professional Home Inspector.
Part of doing your home buying due diligence will be hiring a highly rated home inspector. The home inspector is going to be your second set of eyes. They are going to notice all of the problems that you don’t. The inspector might find something that gives you pause on buying the property. That is what they are there for.
The best inspectors understand that their delivery is just as important as identifying a problem. As a layman, you’re more than likely not going to know what’s a big deal and what isn’t. A home inspector should not make you feel like a minor problem is the end of the world.
6. Budget For All The Costs, Not Just Buying The Home.
You will need more money than that required for purchasing the home. You need to move, furnish the home, and possibly repair the house in the coming months. Many first-time buyers make the mistake of only having enough money to get a home and then having nothing left over when the dust settles. Here are some tips for creating a home buying budget.
Make sure you budget to take care of your expected expenses before you make your final purchase. Having enough money on hand will significantly reduce your stress as a first-time homebuyer. And make no mistake, there will be stress even after you finalize the purchase. It takes time to settle into the role of a homeowner
7. Listen to Your Real Estate Agent.
As long as you hire an agent you trust, you want to make sure to listen to his or her advice. Good agents can be invaluable in the home buying process.
Real Estate agents who have been in the business for a while are battle-tested. They have probably gone through numerous problems. With experience comes problem-solving skills.
When the going gets tough, lean on your buyer’s agent. That is one of their roles in the transaction. Your family or friends may seem like they have the best advice but it could put you in predicaments that could have been avoided if you came your agent first with questions. Your agents advice is valuable and quite frankly it’s why there are here for you. It is not only to protect but to give you the best possible advice to benefit you as a buyer.
