7 Tips for First-time Home Buyers
Buying your first home is a huge accomplishment! It’s an exciting step in your life that you’ve probably been thinking about (and saving up for it) for a long time. But for most first-time buyers, buying a home can be overwhelming – you’re certainly not alone in feeling this way. It’s likely the most expensive transactions you’ll make to date, and the process is like no other financial transaction. So, if you’re getting ready to purchase your first home, here are my six tips to help you prepare for a successful home-buying experience and get you to the closing table!
“Buying A Home For the First Time can be scary and confusing. As a knowledgeable and professional real estate agent, I promise to be a committed ally to negotiate on your behalf, access to systems that will streamline the buying process, and the backing of the #1 Real Estate company in America, Keller Williams Realty. I have helped numerous families sell and purchase their dream homes.”
7 Tips for First-time Home Buyers
1. Figure out what you can afford
Before you do anything else, it’s important to figure out what your budget is lookin’ like. Start by using a mortgage calculator to get a rough estimate of how much you can pay toward a mortgage each month. Then, meet with a lender to get a more solid understanding of what you can afford. They’ll walk you through different loan options and down payment scenarios, which will help you set savings goals and prep you for other home-buying expenses.
For most first-time buyers, the goal is to get a loan with a comfortable monthly payment, so consider your monthly payment more than the purchase price!
2. Save for closing costs
I know, I know. Another thing to pay for. Your down payment does not cover closing costs, so this money has to be set aside as well. Hey – I’m just trying to save you from any surprises!
Closing costs, which usually total around 3% of the purchase price of the home, include the appraisal, transfer fees, loan origination fees, and other costs associated with the transaction. Your lender will give you a specific number so you know exactly what you need to bring on closing day.
3. Get your credit on point
Your credit is one of the key factors in your loan approval. What can you do to prep for buying your first home? Here are my recommendations:
- Pay off your debt.
- Avoid opening any new credit accounts (like a credit card or auto loan).
- Avoid major purchases that increase your outstanding credit card balance. I know, it’s tempting to invest in new furniture for your soon-to-be home but hold off until you have the keys to your new house in hand.
The lender’s mortgage decision is based on your credit score and your debt-to-income (DTI) ratio, which is the percentage of your income that goes towards monthly debt payments. So, the higher your credit score and the lower your DTI, the better your interest rate and financing terms. Request a free credit report from one of the three main credit bureaus: Equifax, Experian, and TransUnion. Review the credit report and double-check that it doesn’t have any errors.
4. Explore different financing options
Don’t wait until you’ve found your dream home to figure out how you’re going to finance it. The time to explore different financing options is now. There are many loan options out there, it’s just a matter of weighing the pros and cons to find what’s gonna work best for you.
As a first-time home buyer, you may not have a ton of money set aside for a big down payment, but that doesn’t mean you have to delay homeownership! There are plenty of low-down-payment loan options that require as little as $1,000 down. Plus, as a first-time buyer, there are many perks that you can — and should — take advantage of. For example, some states offer first-time buyers down payment assistance, tax credits, or home buyer grants (aka free money!). Some lenders even offer reduced mortgage rates for first-time buyers. Be sure to ask your lender to break down each loan option in detail, so you can compare apples to apples and make the best financial decision.
5. Shop lenders
Before you shop for your home, you’ll want to shop for your lender. Your lender should be one of your most trusted advisors. Get to know them and make sure they get to know you (and your goals), too. I’ve worked with too many transactional lenders and let me tell ya, you’ll save yourself a whole lot of money — and headaches — by taking time to choose the right lender.
Interest rates, closing costs, and loan origination fees vary from lender to lender. When interviewing lenders, ask them to come up with your estimated closing costs. You may find a pretty big difference between two quotes!
Pro tip! All mortgage applications made within a 45-day window will count as just one credit inquiry. The government is literally encouraging you to shop lenders!
6. The 75% rule
Too often, first-time home buyers are disappointed that every. single. house. is missing just one thing. Well, I hate to break it to ya, but that’s just how it works.
My rule of thumb: Make sure the house satisfies at least 75% of your must-haves (don’t budge on these!). As for the remaining 25%, you can always update your home overtime. I know it might totally suck to live with those hideous countertops, but is it worth it to stay in the same school district or to live in an area that’s appreciating more quickly? Hell yes!!
7. Find a good Agent
Now that you have figured out what you can afford, talked to a lender, saved for down payment and closing costs, created your “Must-haves” list, and fixed your credit. Now it’s time to find a good Real Estate agent……….
Buying your first home is a big deal, but I know you can do it! Follow these 7 Tips for First-Time Home Buyers and you’ll be well on your way to becoming a happy first-time home owner. Best of luck!
If you are looking for more than just a good agent, CONTACT ME 🙂