Top 10 tips for first-time Homebuyers
Buying your first home is an exciting and rewarding milestone, but it can also be a daunting process. In the following blog post I will share essential tips and advice for first time homebuyers to help give guidance to navigate the real estate market with confidence.
You need to ask yourself, “Can I afford to buy right now?” It is important to lay out your expenses and debts. Do you have a car payment, student loans, credit card debt? If so, can you pay off a few of those debts? Look at your bank account and your budget. Do you have money for a downpayment? What is your monthly income? Will you be receiving a down payment gift? (yes, you can use gift money towards a downpayment, but there are rules and restrictions that apply depending on the type of loan.) A licensed Lender can help determine your budget and what you qualify for. The sooner you reach out to a lender, the more time you will have to prepare the funds and pay off the debts. My best advice is to write out all your monthly expenses and debt payments and see what you have left over. If its not much, then wait a little bit, live below your means, and live off a stricter budget.
Start saving early. There are some main upfront costs to consider when saving for a home.
Down Payment: Now, for first time homebuyers with an excellent credit, on a conventional loan are required as little as 3% down. (No you do not need 20%). But, even a 3% down on a $400,000 home is $12,000. So, start saving right away. Set up an automatic transfer from checking to savings.
Closing Costs: There are fees and expenses you pay to finalize your mortgage, they typically range from 2% to 6% of the loan amount. This is additional money you will have to pay on top of your down payment. In a buyers market you can often ask the seller to pay a portion of your closing costs.
Move-in expenses: Remember to budget for moving costs. Local moves can be up to $3,000 but long-distance moves can be much much pricier.
Decide how much home you can afford. Figure out how much you can safely spend on a house before you start to shop. Check out Nerdwallet’s home affordability calculator, it will help with setting a price range based on income, debt, downpayment, where you plan to live, and your credit score.
Your credit score matters. Before you head to the bank for a loan, make sure you have a good credit score. The higher the number the better. Credit scores range from 300-850 and typically you need at least a 620 in order to be considered for loan. But, most banks and credit unions are looking for a score of 720 or higher. A High credit score will help you get the best interest rates and the best terms. Take the time to improve that credit score if need be.
Speak to a lender and get a mortgage pre-approval. Getting pre-approved is a great first step toward getting a mortgage. Its a document that a lender will provide stating that they are willing to lend to you, up to a certain loan amount. In most cases a Real Estate Agent will require you to have a pre approval before showing properties. Keep in mind, with the right lender, they will give guidance to help their clients get pre-approved.
Make a list of your absolute needs and wants in your house. This includes, how many bedrooms and bathrooms do you HAVE to have? Do your kids need to be in a specific school district? Do you need a yard for your dog? Do you want it close to your work place? Write down the things you absolutely need to find in a home, these are the things that will make or break a deal. Also, write down your WANTS. Do you want the home in walking distance of down town? Do you want a walk in closet, jacuzzi tub, or a large kitchen with an island? How much extra would you be willing to pay for each item? Keep in mind, if you find a home with these wants and they are over what you are willing to spend. Then you can walk away knowing it wasn’t worth it.
Choose a Real Estate agent carefully. You want a Realtor who will find properties within your budget and have your best interest at heart. Realtors have expertise and knowledge of the local market, including property values, market trends, and neighborhoods. Real Estate Agents are trained negotiators that can get you the best possible deal. There is a lot of legal paperwork and regulations that are involved in Real Estate transactions, and your Realtor can provide the legal protection throughout the transaction. Working with a Realtor can save you time, money, and potential headaches when buying a home.
Visit homes, and make the most out of walk throughs and open houses. With technology improvements, there are 3D home tours that have become popular, but they do not supply all the information that an in person visit does. Use it to narrow down your list of properties. I would advise to visit those properties in person, once you have narrowed down your list. being at the home in person gives you a chance to use your sense of smell, hearing, and vision.
Keep an open mind on certain aspects of the home. Don’t get hung up on the paint color, light fixtures, landscaping, flooring, or decor. These are easy cosmetic upgrades that can be done DIY style or with a small price tag. What matters is the floor plan, number of bedrooms, number of bathrooms, home structure, etc. Although these things can be changed, it would take a lot more time and money to do.
Schedule a home inspection. Don’t skip out on the home inspection. A home inspection is a thorough assessment of the structure and mechanical systems. Professional inspectors look for potential problems, so you can make an informed decision about buying the property. Keep in mind inspectors don’t test for radon, mold or pests. Make sure you understand whats included in the inspection. Also, make sure the inspector has access to every part of the house, such as crawl spaces, and the roof.
Remember, your first home might not be your dream home. A starter home is a great stepping stone towards your dream home. Focus on building the equity, investing in a starter home and being patient and over time you will achieve homeownership.
