Buying a home might seem intimidating, especially if you’re a first-time homebuyer. However, If you learn what it takes to buy your first home, it will be easier for you to navigate the real estate market. The following tips will help simplify buying your first home.
Determine the Home You Can Afford
Before getting emotionally attached to a beautiful home, consider your monthly budget and determine how much you can afford for a home. Remember to leave an allowance in your budget for other expenses. So, ensure your monthly housing costs (such as insurance, HOA fees, and taxes) do not exceed 25 percent of your monthly take-home pay.
For example, suppose your take-home pay is $6,000 a month. Your monthly house payment should not exceed $1,500. Remember, homeowners’ insurance and property taxes will also affect your monthly payment. Thus, you will also need to consider those numbers before determining the maximum price of the home you should buy. Every city is different too. If you are looking in a place with a hot real estate market, like Denver, then you won’t get as much bang for your buck compared to a place like Houston.
When saving for a home, here are the primary costs to consider:
• Down payment: The lender and the type of mortgage you choose will determine the down payment requirement. Some unconventional loans tailored for first-time homebuyers with excellent credit enable them to pay down as little as 3%.
However, it’s challenging to save for even a small down payment. For instance, a 3% down payment on a $400,000 home is $12,000. So, create your down payment goal, and then configure automatic transfers from your checking account to your savings for a quick start.
• Move-in expenses: After purchasing the home, you need some cash for upgrades, repairs, and furnishings.
• Closing costs: You pay these expenses and fees to complete your mortgage, and they often range from two percent to five percent of the total loan. You can request the seller to pay part of your closing costs, and you can save on other expenses such as home inspections by finding more affordable service providers.
Maximize Your Credit Score
A good credit score can make you eligible for a highly affordable mortgage loan. To help increase your credit score before a loan application, ensure you:
• Know the minimum credit score that will enable you to acquire the mortgage you’re scouting for
• Check your credit score and report.
• Correct any errors on your report
• Pay your bills promptly.
• Ask lenders to remove any flaws on your credit report. As a goodwill gesture, some lenders will do this.
Having a low credit score cannot prevent you from buying a home. It would be best if you explored the other options available for you.
Get a Pre-Approval Letter
After finding a mortgage lender with the most competitive terms and rates, apply for pre-approval.
This process involves giving your lender your financial information so they can appraise your application for the mortgage, determine your eligibility for a loan, and offer you personalized rates.
Although getting pre-approved doesn’t mean your application will be granted, it prepares you for the final approval once you find a property. Some home sellers also request a pre-approval letter before they accept your offer.
Find a Competent Agent
As a first-timer, you will need a competent real estate agent, particularly a buyer’s agent who will help you find the right house, negotiate the deal, and explain to you all the home-buying nuances during the process.
For first-timers, the good news is the agents’ services are free because the seller foots the sales commission.
There is an essential difference between a Realtor® and a real estate agent. The former is a member of the National Association of Realtors® and is bound by a particular code of ethics. So consider having a realtor to help you in this process.
Research the Properties Carefully
Before you search for homes, ensure you know your needs. Find out about the daily commute. If you intend to set up a home-based business in your new home, find out about the zoning laws.
If you would like to start a family in your new home, research the school districts.
Apart from the home’s price, consider the home size, location, school district, neighborhood noise, essential amenities, and other vital elements such as whether the home is in a homeowner’s association neighborhood.
Make an Offer
Once you find your dream home, it’s time to make your offer to the seller. Specify who pays the closing costs and when your intended closure on the house would be.
Get a Home Inspection
Hire a home inspector to investigate the house to determine if it has any structural problems. Consider problems such as a faulty foundation, mold, or termites. Once the inspector determines the house is safe, close the deal.
You only buy your first home once, and the most important thing is to find a comfortable house in an excellent area, and at a price, you can easily afford. With the above tips, you will navigate your first real estate deal without a hassle.