Buying a first home is one of the most exciting and rewarding steps in life, but it can also be very stressful. In fact, buying your first home is one of the top stressful things you’ll experience throughout your life. Don’t let that thought worry you though! We’re to help you out with some tips.
We’ve put together 12 of the most important things to know when purchasing your first home. Let’s take a look!
The first home-buying tip you should pay attention to is this: Get rid of debt. This may seem a bit obvious, but it’s something that makes a huge difference! If you have any debt at all, whether it’s credit card debt, student loan debt, or car payments, those debts should be taken care of before applying for a mortgage.
And the sooner they are paid off, the better. That means no more charging things on your credit cards and paying them off over time. No more buying new cars every few years just because you feel like it.
When you purchase a home you’ll be responsible for everything on it. The maintenance and upkeep, damages and repairs, insurance, and much more. The less debt you have beforehand, the better.
Pricing and affordability are two very different things you should think about. And it’s important to understand this when shopping for the right house.
So how much is too much? It depends on your situation and whether you will be using a conventional or government-backed mortgage, but the general rule of thumb is that you should spend no more than 28% of your gross income on housing expenses. Keep in mind that this number may change depending on where you live.
This is something else that can vary from state to state. For example, some states have special programs in place to help first time home buyers purchase a new home with a smaller down payment. So always check to see if your state is offering something!
Hidden costs is another one of the most important to know when buying your first home.
Just like when buying anything else, or when you sign up for any service (think: cable TV), there are always fees and extras that add up. And moving expenses, closing costs, insurance premiums, tax penalties if your mortgage payments aren’t made on time – all of these things cost money.
What’s more, every state has different rules and regulations. Don’t forget to consider these when buying a new home. Otherwise, you could be in for a major surprise with the amount of money you’ll have to come up with at closing.
When you’re buying your first home, don’t just talk to one lender. Go shopping and compare. Look for multiple lending offers (or haven’t had an offer at all). You can consider credit unions and local banks as they can be a great alternative to big national lenders.
If you have a poor or bad credit rating, then this could affect what you’ll pay in interest and how much money for down payment you’ll need. Knowing these kinds of things can help you prepare for them before even stepping foot into the house buying process.
Make sure to go get a copy of your credit report as soon as possible. If you need to improve it, the sooner you get started the better. Building up your credit score doesn’t happen overnight, it can take months and even years depending on how bad it is.
The mistake that many first-time homebuyers make is rushing the process and not doing their homework.
You should ask yourself:
Do I really want to buy a house? Do I have my finances under control? Am I ready for this kind of change in my life? What is going on with interest rates, and what will they do next?
These are all important questions you need to be asking yourself before attempting to purchase a new home. If you don’t, you’ll regret it later down the line when things go south. And if something does go wrong with your purchase, there’s no way of getting out from under it. You’re stuck with them! So take your time to do everything right from the start.
Getting a pre-approval letter from a lender is a great way to set yourself up for success. This letter will allow you to negotiate with home sellers knowing that you have the financial capability of getting your mortgage ready. Try to get your pre approval before you go house hunting!
It’s also worth mentioning that getting pre-qualified can be done online and can be accepted within a few days.
A benefit of having a positive mortgage pre-approval is that it eliminates the uncertainty of no longer being able to get a loan, and allows buyers to make informed decisions on properties they may consider buying. Make sure all future lenders agree with the terms on your pre-approved letter before proceeding further into the process.
Always think about the future, plan for 10 years from now, not 3 months. Do your future plans line up with this home? You need to think about where you see yourself in 5-10 years; If the house will fit into that lifestyle.
This is also a good time to ask yourself if you’re willing to move again in just a few years, or if you’re ready for roots and staying put.
This also applies to the house itself. Is this house in a neighborhood that will continue to grow over the years? Will the house value rise or drop? What kind of repairs will the house need?
When making an offer, ask to negotiate repair costs into the deal. If you’re working with a good real estate agent who can be your advocate in these negotiations, then this will definitely benefit you in saving money and getting the repairs taken care of sooner than later.
The worse they can do is say no to your offer and then you pay the asking price. But if they accept your offer, you could be saving thousands.
As mentioned before, always check to see if your state is offering something, especially since this will be your first home. There are federal, state, and local first-time homebuyer programs are available.
Some loan programs allow first-time homebuyers to make a down payment as little as 3% to 5% of the purchase price. You can also consider purchasing a duplex or another multi-unit instead of purchasing a single-family home.
You’ll be able to live in one unit and rent out the other unit(s) to tenants. The rental income can cover the mortgage payment and allow a homeowner to live mortgage-free.
Do your research on down payments, you’ll want to make sure you have the money saved up for at least 10% of the total house cost.
You can also look into making a larger down payment if possible (such as 20% or more) to reduce interest rates and monthly payments.
If you want a house and the down payment, but it’s going to be very difficult to come up with 20% of the asking price for a single-family home, one option is a program called the First Time Home Buyer Program.
It’s usually ideal if you are able to get a 15-year fixed rate mortgage with 10-20% down. So if you are able to do this, it tends to be a more optimal choice for first-time home buyers.
Another option is the FHA loan program. The downside of the FHA loan is that it requires mortgage insurance, which you will have to pay for every month (the premium).
Not only is buying a home stressful but it can also bring on other emotions. It’s important to think about your decisions and make them based on critical thinking instead of emotions.
This is a place where you’ll make memories and create space, and eventually build roots and possibly a family.
Buying your first home is one of the most important things you’ll do in your life. It’s not something to take lightly and it can be hard when you don’t know what questions to ask or how much money you need saved up for closing costs.
Hopefully, this guide was able to help you and provide valuable information and thoughts to help you along with your home buying process.
If you have questions or want to learn more about mortgages or anything else related to purchasing your first home, head over to our blog page or send us a message. We’re here to help!
