Need First-Time Homebuyer Tips?
When you buy a home, there are many moving parts. Having the best experience means getting every detail just right. The first-time homebuyer tips highlighted here will keep you on the right track.
Save Well In Advance
Buying your first home requires money, and you will need to save plenty for your down payment and other things.
While you don’t need a 20% down payment anymore, many financial experts recommend putting down as much as you can afford. A larger down payment means a lower monthly payment and sometimes a lower interest rate.
However, first-time homebuyer programs are available with as little as 3% and 3.5% down.
You also will need to pay closing costs, which can equal 2-5% of the loan amount. So, if you have a $200,000 loan, you could pay as much as $10,000 in closing costs. It’s often possible to wrap the closing costs into the mortgage, but you will have a higher payment.
Have questions about loan programs? You can talk to your real estate agent, who probably has networks established with qualified loan professionals in your area.
Work On Your Credit
About a year before you want to buy your first home, you should check your credit score with Equifax, Experian, and Transunion. Your interest rate and down payment will vary based on your credit score.
If your credit has a few dings, you want to make sure you make your debt payments on time. You also should pay down debt to increase your credit score.
Some credit reports have errors, so you should ensure everything is accurate. For example, a credit card company can report a credit card payment as late when it’s on time.
You can dispute the inaccurate information on the credit report and provide proof that you paid it on time. However, if the credit card company finds the error is legitimate, they must remove it and update your report.
Figure Out How Much Home You Can Afford
It’s essential to figure out how much house you can afford before shopping. This way, you don’t waste time on homes outside your price range.
You should talk to your mortgage loan professional about getting pre-approved for a mortgage. The mortgage provider will review your finances and credit score and tell you how much home you can buy.
While a pre-approval isn’t a guarantee the loan will close, it’s an integral part of the homebuying process.
Most real estate agents and sellers want to see a mortgage pre-approval so they know you can close the transaction.
Remember The Hidden Costs
Owning a home isn’t just about your monthly principal and mortgage payment. You also need to pay for insurance, HOA dues, and property taxes.
And you also will need to pay for essential maintenance and repairs. For example, if the home needs a new roof or AC, you could have to spend thousands of dollars not long after you buy the house.
That’s why it’s essential to build an emergency fund for repairs. Many experts say you should have three to six months of mortgage payments saved, plus additional funds for repairs.
Look At First-Time Homebuyer Programs
It can be more challenging to buy your first home because you don’t have equity for a down payment. But there are many loan programs available for first-time buyers.
For example, FHA offers mortgages with low down payments and interest rates for first-time buyers with lower credit scores.
FHA allows you to make a 3.5% down payment, and their interest rates are competitive with market rates. As a result, this can be an attractive program for the first-time buyer with limited funds.
Don’t Take On New Debt Before Loan Closes
After pre-approval, it’s tempting to open up two or three credit cards and buy things for your new home. But this can lead to the loan falling through.
Taking out new credit will lower your credit score, which can create problems when you sit down to close the loan. If your credit utilization and debt-to-income ratio change, this could prevent you from buying the home.
Shop Different Mortgage Lenders
Some homebuyers just go to their bank to get a mortgage. There’s nothing wrong with getting a quote from them. But it’s always best to check with several lenders, such as a bank, credit union, and mortgage broker.
Different loan providers construct their loans in different ways. For example, you could qualify for the same loan program at two lenders, and one may have a ½ percent lower rate than the other. Also, one lender may have lower closing costs than the other.
Analyze your financial and personal situation to determine which program is best for you. For example, you may want to refinance the home in two years. So it could make sense to choose the program with lower closing costs.
But how much the interest rate is or closing costs. You also should look for a mortgage company that often communicates with you. And you need a mortgage company with a reputation for closing loans quickly and reliably.
Buying your first home is exciting, but it’s essential to be prepared for the entire process. The tips above will ensure you’ll be able to close the loan and get a great deal. Just keep these ideas in mind to make the experience a smooth one.