The decision to purchase a home is a significant one. Your house purchase is a major financial investment that will impact not only your finances but also your lifestyle. While the mortgage application and house-hunting process can be stressful, they can also be thrilling if you know what you’re looking for and how to get there. This guide and its helpful recommendations will provide you with the information you need to successfully buy your first home and teach you how to avoid the traps and make a wise real estate transaction.
First-Time Home Buyer Considerations
The more initial consideration you put into your home-buying plan, the more streamlined you can make the process. If you’re looking for a home for yourself or with a partner, your needs are likely to be somewhat different than if you’re looking for a home for yourself. In fact, ask yourself several questions before contacting a real estate agent. Your responses will assist you and your realtor in locating the properties that are most suitable for you:
- What type of home do you want—ranch, townhouse, condominium?
- What is the perfect square footage for you?
- How many bedrooms and bathrooms do you need?
- What specific amenities are you looking for, such as a two-car garage, solar panels, a swimming pool, or a basement?
- What elements of a home are you opposed to, such as a multi-story floor plan, a septic system, or the need for extensive landscape maintenance?
Consider the location carefully. You aren’t only shopping for a house—you’re shopping for the ideal neighborhood and community too. Ask yourself questions such as:
- Is public transportation available?
- What is an appropriate commute time to work?
- What kinds of amenities do I desire, such as a public pool, parks, a community centre, and shopping and dining options nearby?
- What are the school’s ratings in the area?
- What’s the area’s crime rate?
There are many factors that go into selecting the ideal property and setting. Consider them carefully so that you can choose the best property for you and your household.
First-Time Homebuyer Advantage
First-time homebuyers can typically take advantage of a variety of incentives meant to assist them in purchasing a property. First-time home buyers have access to a variety of programs and loans that aren’t available to other buyers. In fact, you might be eligible for home-buyer help.
Do you qualify as a First-Time home buyer?
If you’ve never bought a house before, you should be able to take advantage of first-time home buyer benefits. If you haven’t owned your primary residence in the last three years, you may be eligible for these programs. Your real estate agent or lender should be able to explain the various options available to you based on your unique situation. If they can’t, find someone that can.
What are the Requirements needed to qualify as a First-Time home buyer?
Typically, financial requirements are linked to first-time home buyer loans and benefits. Some people who make more than what their state or county considers a low or middle income may not be eligible for first-time home buyer assistance.
What are First-Time home buyer Programs?
Before buying a property, you should learn about the numerous first-time home buyer programs available. Some will suit you better than others. For example, some loans for first-time home purchasers require little or no down payment. Make sure to look at the following programs to discover the best fit for your needs:
- USDA Loan
- VA Loan
- FHA Loan
- Programs such as Fannie Mae or Freddie Mac
- Good Neighbor Next Door Program
- Native American Direct Loan
- Energy-Efficient Mortgage
- State and local first-time buyer grants
In some cases, you might even qualify for multiple options. For instance, you might qualify for both an FHA loan and a local grant if you fall within acceptable income levels. These programs were designed with the goal of helping more people enjoy the opportunities associated with home ownership.
The Buying Process
Before you start looking at properties, it’s a good idea to get some of the headaches associated with buying a house out of the way. In a nutshell, apply for a home loan pre-approval. This way, you’ll know exactly what the bank or lender will accept, and you’ll be able to limit your house hunting to properties that fit your budget. Make sure you have all of the necessary documentation and paperwork for this procedure. Even if you’ve been pre-approved, you’ll need them at several points throughout the mortgage process:
- Credit score
- Recent bank statements
- Proof of employment with recent pay stubs
- Last three tax returns
- Any documents pertaining to your financial assets
Find a Real Estate Agent
Because this is your first time house hunting, it’s a good idea to enlist the assistance of an experienced real estate agent. Obtaining the services of an agent is usually free of charge to buyers. Real estate agents have access to a wide range of resources to assist clients in finding the best property for their needs and budget.
Shop around
Make sure to look at a variety of properties to get a clear understanding of the types of homes available in the area where you want to live. Use digital applications to keep track of your home visits so you can refer back to them when deciding whether or not to bid.
Get a High-Quality home Inspection
Once you decide to bid on a house and the seller accepts your bid, you’ll want to order a thorough house inspection by a certified home inspector. The inspection will uncover any damage or problems that you may not be aware of when first taking a look around the home. Depending on the findings of the report, you may choose to proceed with the purchase (or not) or negotiate for a better deal.
Avoid these Pitfalls and Mistakes
Even the most experienced real estate buyers make mistakes. Because each transaction is unique, give yourself plenty of time to consider your purchase before signing on the dotted line. Here are just a handful of the common mistakes to avoid if you want to avoid unneeded stress:
- Making a quick decision. It’s preferable to look at a larger number of properties than a smaller number. Be sure you examine all the different home options available.
- Miscalculating repair and renovation costs. Remember that your monthly mortgage will NOT be your only living expense. Make sure you consider the cost of maintenance and repairs before purchasing a home.
- Emptying your savings account. While you might want to put down as much as possible on your new home, don’t drain your savings account. It’s a universal truth that if you do put it all into your down payment, something major will go wrong and you’ll need a new refrigerator, sewer line replacement, or tree removal. Don’t underestimate emergency costs such as these.
Create a Saving Plan
If you’ve recently decided to purchase a home but don’t yet have enough money for a down payment, you’ll need to create a savings plan. Although most individuals believe that they must put down 20% of the purchase price to qualify for a mortgage, this is not the case. In fact, the typical down payment is around 7%. However, different types of loans may have different requirements for the amount you must put down. For instance, some state and local grants provide a matching requirement. For example, if you give $5,000 for the down payment, they will provide $5,000. These programs often have certain requirements. In fact, in order to avoid having to repay this money, you must reside in the house for at least five years.
You’ll probably need to make other financial adjustments. Be sure to maintain good credit while continuing to use your credit cards. Don’t necessarily pay off your credit card debt. Lenders don’t want to lend to people with too much debt, but they also want to see that you pay your bills on time. You might also have to make lifestyle changes in order to save more money. To save money for your down payment, you may need to cut back on your travel or leisure expenses.
Essential Home Buying Tips:
- Get pre-approved for your mortgage—you’ll be glad you did!
- Be careful to budget for closing costs—sellers don’t usually cover these expenses, but you might be able to negotiate with them.
- Working with a real estate agent who is experienced in helping first-time home buyers isn’t all made equal. Look for someone who appreciates the experience of the first-time buying process.
- Be careful about older homes. Any home can become a money pit, but older homes often have more maintenance and replacement needs than newer homes and that comes with a cost you might not be prepared to pay.
- Consider the neighbours. While you can’t “interview” the neighbours of a home you want to purchase, it never hurts to learn a bit about them.
- Stay within your budget. You know what you’re comfortable with budget-wise, so don’t overspend. In truth, just because the bank has pre-approved you for a certain amount of money doesn’t mean you can’t look for a home that is less expensive.
First-Time Homeowners FAQs
How Much House Can I Afford?
When you apply for pre-approval, the bank will inform you how much you can afford. However, think about your lifestyle and how much money you spend on a monthly basis. Buying a house you can’t afford is the last thing you want to do.
How Long Does It Take To Purchase A House?
Once you find a house, bid on it, and hear back from the seller that they accepted your offer, you can usually expect the closing to take place anywhere from 30-45 days later. However, the time frame varies with each deal.
Aside From The Mortgage Payment, What Other Monthly Fees Do I Have To Pay?
Depending on your home loan, your property taxes and home insurance costs may be included in your mortgage payment. If not, you’ll need to make these payments separately.
What Credit Score Do I Need To Qualify For A Home Loan?
Keep in mind that every loan and lender will specify a different amount. However, a score of 620 or lower is considered poor. The better your credit, the better interest rate you’re going to qualify for.
How Do I Choose A Lender?
You don’t owe a lender your business just because they pre-approved you for a mortgage. Always browse around for a lender to ensure you obtain the best terms for your loan.
Summary
Keep this guide on hand as you navigate the home-buying process. Don’t be afraid to ask lots of questions. If your real estate agent or lender appears unenthusiastic about answering all your questions, shop around for someone else. Buying a house is a major financial and lifestyle commitment. You have every right to weigh your options slowly and carefully, obtaining all the information you need to make a smart decision.