Buying your first home is stressful. There are costs you may not know about, terminology you may not understand, and steps you may not be prepared for. It’s okay to be stressed. We’re here to help. We compiled 16 tips below to make everything a little easier.
Figure Out How Much Home You Can Afford
Before you start looking at homes, you need to determine a price range.
Build Your Credit
Your credit score helps determine whether or not you’re approved for a mortgage loan and the interest rate you’d receive. Credit score is a major factor. Small things like reducing debt help build your credit.
Stop New Credit Activity
When you get a new credit card or take out a loan, lenders pull your credit. This pull typically reduces your credit score by a few points. You want a high credit score when you get preapproved for a mortgage loan, so pause your credit activity.
Your Monthly Payment is Larger if You Don’t Put 20% Down
A lot goes into a monthly payment (more on that soon). If your down payment isn’t at least 20%, Private Mortgage Insurance (PMI) will be added to your monthly payment. But that leads us to our next point.
Don’t Drain Your Account for a Down Payment
It’s tempting to put much of your savings toward a down payment. Sure, it lowers your monthly payment, but you need to keep a healthy account balance. Set up a savings plan for a down payment.
Know Everything That Goes into Your Monthly Payment
Your monthly mortgage loan payment is more than principal and interest. You have to factor in property taxes (varies by location), home insurance, PMI (if you don’t put at least 20% down), and possibly Homeowner Association (HOA) Dues.
There Are First-Time Home Buyer Programs Available
Many credit unions, banks, and communities offer first-time home buyer programs. Commonly, these programs help with your down payment. Search around to find programs in your area.
Get Financing Before You Fall in Love with a House
You may fall in love with a home only to have your heart broken. It could be sold while you’re getting preapproved, or you could find out you weren’t even approved. Find a Mortgage Loan Officer for help.
Find a Good Mortgage Loan Officer
A Mortgage Loan Officer will help you through every step of the home buying process. They’re experts when it comes to mortgages, so you can turn to them for any questions about your loan. We have a great team of Loan Officers ready to help from start to finish.
Prequalified Isn’t the Same as Preapproved
Being prequalified helps you know what you can afford, but it doesn’t mean you have a loan in place. Being preapproved requires a credit check and tells you exactly how much money you can borrow. In fact, many realtors may not work with you until you’re either prequalified or preapproved.
Work with a Realtor
Realtors help you navigate certain elements of the process. For example, setting up tours, recommending homes, etc. They’ll also know what first-time home buyer programs are available to you.
Be 100% Sure
Be sure about the home you’re buying. If you’re absolutely positive it’s the right home for you, make an offer. Take your time and think about it.
But Don’t Waste Time
Not all homes stay on the market for long. Once you’re sure you’ve found a home you love, make a smart offer right away.
Make a Smart Offer
Low-balling your first offer could backfire, but you don’t want to overpay or get into a bidding war. Stay aware of current market conditions and consult your realtor. Use every resource available to you.
Be Aware of Closing Costs and Loan Fees
When considering how much you’re spending, remember to factor in the closing costs and loan fees. This could be a few hundred dollars or it could be more than $1,000. Ask your lender what to expect.
Reserve Money for Home Improvements
Many first homes aren’t perfect. And some people look specifically for fixer-uppers. When thinking about overall cost, add the expenses that come with renovations (paint, flooring, roof, appliances, etc.).