Attention first time home buyers, we’ve got just the blog post for you.
Purchasing your first home is an exciting time for everyone involved. Whether you’re a young single professional or a long-time couple with kids, having a home to call your own is an undeniably happy thing.
Getting to this point was probably pain-staking and financially exhausting, though. If you’re confused by the entire home buying process…well, you’re not alone. There are so many little hacks along the way that can make the whole thing a bit easier.
In this post, we’re going to go over 12 of those tips that can help make it a bit easier to be a first time home buyer. We understand that there’s a lot of uncharted territory that comes with becoming a homeowner, so let us shed some light on this lengthy, expensive, but ultimately, happy time in your life.
12 Tips For First Time Home Buyers
You’ve saved and saved and saved, and here you finally are. Buying your first home is terrifying but even more satisfying. If you feel like you don’t know what the heck you’re doing taking on all of these responsibilities and spending all of this money, then read on. These are our 12 tips for first time home buyers.
1. Don’t Get In Over Your Head
When this whole process begins, it can get overwhelming. Before you decide to purchase a home, you should get your finances in order and figure out how much you can afford. You don’t want to get in over your head with a home that’s too expensive.
The cost of the house itself isn’t the only expense that you should expect. When you factor in homeowners insurance, taxes, and HOA fees, the monthly cost of your home is pretty expensive.
To save for other things, try and make sure that these costs don’t eat up more than 25% of your monthly income. Crunch some numbers and get a house that you love, but also a house that you’ll be able to afford.
2. Start Saving Early
When the slightest thought of buying a house pops into your head, you should start putting money into savings. The more money that you have saved by the time you’re seriously looking for a house, the closer you’ll be able to get to buying your dream home instead of a starter home.
Take as much as you can from every paycheck and throw it in a savings account. You don’t need to stress over how much it is. If you know that you want to buy a home one day, even at an early age, then you should start saving to help your future self.
3. Look Into Mortgage Options
You’re going to have options when it comes to your mortgage. The more you spend on your down payment, the lower your monthly mortgage payment will be. So, if you can afford it up front, you can make your life a lot easier down the road.
Most younger folks can’t put up a whole lot of money on their down payment, so they need to figure out the right mortgage plan. To get the lowest possible monthly mortgage payment, opt for a 30-year plan. There are also 15, 20, and 25 year plans as well if you can afford higher monthly payments.
4. Find The Right Loan
Unless you’ve got the money ready for your down payment, you’ll probably need to talk to a bank about getting a loan. There are different loans in place that have different pros and cons. Talk to your bank representative to find out what they can do for you.
There are also government programs available to assist first time home buyers. An FHA loan helps potential home buyers with low credit scores that can’t afford their down payments. This is a great alternative to bank loans, which require higher credit scores to qualify.
5. Oh, And Work On Your Credit
Speaking of credit, when you’re in the planning stages of buying your home, you’ll need to start working on your credit score so that you qualify for whatever loan you need.
As we said, FHA loans don’t require a high credit score. With these, a first-time home buyer can purchase a home with a credit score of 580 with 3.5% down or 500-579 with 10% down.
Get your credit report done and see where you stand. The higher your credit score, the lower the interest rate on your loan will be. Lenders like to see a long history of borrowing from multiple sources with good payment history. This is what makes up your credit score.
Improve your score by frequently paying off your credit card and any other loans that you might have. It’s good to have debts minimized when applying for home buying loans to get the best possible situation.
6. Getting Pre-Approved
When you start shopping for homes, you should flaunt your loan qualification to sellers so that they know you can afford the home. A pre-qualification letter is just a letter from your lender that says how much they’ll likely lend you based on your income and debts.
This will add a level of seriousness to your application. As you get closer to buying, you can obtain a more detailed version of a pre-qualification letter that will guarantee exactly how much your loan is worth. Use this to show the seller that you’re serious about buying.
7. Find The Right Neighborhood…And Budget
You’ll probably have some depiction in your mind of what your house, neighborhood, neighbors, yard, etc. will look like. It’s important not to get too tied up in what you want. Keep your budget in mind when you’re fantasizing.
Do some research and find out what’s important to you and your family. When you’ve narrowed your potential houses down to a few, begin to look at things like crime stats, where the nearest schools are, how congested traffic gets, then look at a map and see where your amenities are situated.
Of course, you’ll need to make compromises and sacrifices based on what is most important to you. You might find the ideal starter home that’s perfect for you, but it might be too far from any schools or in a neighborhood that you don’t like. Try and find something that strikes a balance between all of your requirements.
8. Keep Closing Costs In Mind
Closing costs can often get lost in the fold. Once all is said and done, your closing costs will end up being between 2-5% of your total loan amount. “Closing cost” is a broad term for a wide range of things that occur after you’ve closed on the house.
They include any legal fees, land transfer taxes, homeowners insurance, home inspection fees, prepaid utility bills, property taxes, and things that you need to do to fix up the house (septic and water tests for example).
All of these things cost a little bit of money but add up to a large sum as they start to accumulate. Make sure to budget for all of these things on top of your down payment and mortgage.
9. Competitive Offers
The housing bubble in many large cities has reached a point where few people can actually afford to buy. People are taking out massive loans to pay for homes that are going hundreds of thousands of dollars over asking.
When you’re house hunting, communicate with your real estate agent to offer competitive prices, but not anything that’s over your budget. You don’t want to cripple your finances because you want that one house. Don’t get too attached to anything and you’ll eventually find something that suits your needs in your budget.
If you’ve got your letter of loan approval, bring that along with a personalized letter with your offer to show the seller that you really want the house. A personalized touch can go a long way if you’re close to the asking price.
10. Open Houses
Attend lots of open houses. Even if you think that there’s no chance you’ll want a house, it’s good to get used to attending these things. Sometimes, a house or neighborhood can surprise you. There are things you can change over time about a house, but you can’t replace a good neighborhood.
When you’re at an open house, make note of its condition and be sure to ask a lot of questions about the age of the house and appliances, if they would be open to replacing anything, and if the HVAC systems are up to date.
One of the closing costs that we mentioned earlier will be a safety inspection. This will tell you what sort of condition the house you’re buying is in, but make sure that you’re getting what you paid for.
Attend the inspection and make sure that the inspector can get to every nook and cranny in the home. A lot of inspections won’t test for things like mold or pests, so make sure that you ask them to look closely at everything and get the clean bill of health for your new home.
12. Buy For The Now
Lastly, make sure you’re buying for the now. If you’re a young, first-time homebuyer, it’s easy to get wrapped up in the excitement of buying a new home, but chances are, this won’t be your last home.
Don’t think too far into the future when coming up with the criteria that this home must fulfill. Instead, think about what you and your family’s needs are right now and fulfill those. In the future, you can sell and look for a new home or renovate the home that you buy now as you discover new needs.
If you get caught trying to project what you’ll need in the future, you could end up paying too much for a home that you might later find is too spacious or in a neighborhood that you might not love. Worry about what you want right now, not what you might want in 10 years.
Find Your New Home
Take these tips and find your new home today. There is a lot of information that first time home buyers need to make themselves privy to, but as long as you go into the process having done a lot of research and a flexible mindset, there’s no reason that you can’t find a great home for a good price.
Start saving for your new home today, even if you don’t know you want it yet. Saving now will help you find your perfect starter home down the road.