Anyone who is considering buying their first home will quickly discover that it can be one of the most stressful and overwhelming moments of your life. However, with the right information, you should find it easy and mark it as a memorable and significant milestone. Like every other achievement, one needs to make meaningful and strategic decisions when purchasing their first home.
For a successful and memorable home-buying experience, you need to get the details right from the beginning till the end. If you are not familiar with the buying process, keep reading to discover some tips that will make the process easy.
Start Saving Early
One of the first tips to consider when looking to buy your first home is to start saving as early as possible. When saving, you need to consider some main costs like down payment, closing costs, and moving-in expenses. The down payment will depend on the lender and the type of mortgage that you choose.
On the other hand, the closing cost is expenses and fees that you pay to settle the mortgage, usually from 2% to 5%. The moving-in expenses are the cash that you will need when you purchase the home. So set aside some cash for the home furnishing, upgrades, repairs, and door and window replacement. However, setting aside some money for the latter could really reward you in time to come, as better quality windows could minimize drafts and stop heat escaping. This, in turn, will lower your bills, and as a homeowner-to-be, finding ways to cut your bills is crucial, especially when you consider you will have to keep on top of property maintenance that you are used to your landlord covering.
Decide How Much House You Can Afford
You need to know how much you can realistically spend on a house. Before you get attracted to a beautiful house, first check what you can afford to buy based on your income. When determining your budget, you need to make room for other things like:
• HOA fees and more
So ensure that your monthly housing budget should be no more than 25% of your monthly salary.
Review and Improve Your Credit Situation
The next thing you should do is review your credit situation and do everything you can to improve it before you start applying for loans. This will allow you to access more options, bigger loans, and more favorable fees.
The very first thing you need to do is get a copy of your credit report. You are entitled to a free copy of your report from all 3 major credit reporting agencies: Equifax, TransUnion, and Experian. Once you get it, you can start reviewing it for issues or possible errors. One simple error could ruin your chances, so make sure that you look at every detail and dispute anything that shouldn’t be there.
Another thing you should do is reduce your debt utilization ratio. You also don’t want to close credit card accounts, unless you’re having trouble keeping your debt under control. Closing an account will actually increase the portion of available credit that you’re using. Instead, try to reduce the limit on all of your cards gradually and use one card as your main one.
Get Pre-Approved for a Loan
Once you are confident you have enough money for the closing costs and over 20% of your home, then you can handle the 80% by applying for credit. You can discuss this with a mortgage lender. Ensure you are pre-qualified for credit and get a pre-approval note before you start your home search. To get the letter, the lender will verify your financial details such as tax, proof of payment, etc. This letter shows sellers that you are serious about buying.
You should also consider looking at as many options as you can. There are all sorts of mortgages available with different eligibility requirements and benefits. You could get an FHA loan that will be backed by the federal government, for instance. These allow you to get a mortgage with as little as 3.5% money down. You also have loans that are issued by the USDA that are reserved for people buying properties in rural areas. Some of these require no money down to qualify. You even have VA loans that are issued by the Department of Veteran Affairs and are reserved for current or ex-military personnel.
Research Neighbourhood for Best Fit
After you find a home within your price range, you need to consider the neighborhood quality and location. If you have kids attending school, you also need to check the distance from your new home to the nearby schools. Additionally, you should ask your realtor for information about the quality of schools around and the rate of crime in the neighborhoods.
This also would be a good time to start looking at the median price of homes in the area and price trends. It’s more important to know the median price of homes than the average price as averages can be affected by houses that have been sold for uncharacteristically high prices. Knowing the median should give you an idea of which offers would be reasonable for this kind of home in that kind of area.
Make a Competitive Offer Within Your Budget
Once you’ve seen a house that you can afford and have your pre-approval letter, you are ready to make an offer. As a first-time buyer, knowing how much you should offer might be a daunting task. However, you can depend on the expertise of a real estate agent. Ask your agent to ensure you make a competitive and budget-friendly price.
This would also be a good time to start negotiating things into the sale. For instance, if you find issues during the inspection, you could try to get the owner to perform the repairs at no extra cost, or you could use them to further drive the price down. This could be a great deal for you if you think you can perform some of the repairs yourself at a discount.
These are just a few essential tips that will help you get the best deal on your first property. You’ll also be able to avoid making mistakes that could end up costing you dearly in the end.