First-time home buyers have several things to think about. They need to research mortgage options, get pre-approved, save for a down payment, hire a buyer’s agent, make sure they have a list of their must-haves and nice-to-haves, on top of all the other payments that life requires. This can be a very hard job, but knowing what things you have to do can make it much easier.
Start saving for a down payment early
The good news is, there are ways to start saving for a down payment early. However, the bad news is, saving for a down payment is not easy. It can take months, if not years, to build a down payment fund, but there are ways to increase down payment funds.
One way to increase your down payment savings is to cut out unnecessary expenses. This will free up some money in your budget each month. If you have a mortgage, your monthly payment should never be more than 25% of your take-home pay.
When saving for a down payment, it’s also a good idea to set aside a small emergency fund that would protect you from unexpected life events. Even though this might not be needed, having a buffer in the case that something does go wrong would be trivial in making sure you maintain your health and financial stability.
A good emergency fund should be equal to three to six months of living expenses. You should also consider investing some of your savings. Although the money may be gone in the short term, it can provide a nice return when you’re ready to buy your new home.
Ideally, you should try to save at least 10% of your income for a down payment. However, some first-time homebuyers are buying with as little as 5% down.
Many programs help you with the down payment. These include local government programs and the U.S. Department of Housing and Urban Development. In some cases, these programs even offer tax credits and down payment grants. Ultimately, saving for a down payment is a big commitment, but it can and should be done to make sure you get the best rates for your situation. You just need to take action and make sure you have a solid financial safety net. After creating a savings plan, check in frequently to see how you are doing. You can also get advice from a certified financial planner to help you further with your spending.
Get pre-approved for a mortgage
Pre Approval is an incredibly important part of buying a home and not something to overlook. Pre approving gives you a good idea of what you can borrow and how much you can pay for a home, and how much your mortgage will cost. You should get preapproved before you even start house hunting.
To get preapproved, you’ll need to fill out a mortgage application and provide financial documents. Lenders will then review your credit history, assets, and income to determine if you qualify for a loan. The more information you can provide, the more accurate the lender’s estimate of your loan amount.
Mortgage lenders usually offer preapprovals, but each one has its guidelines. Some may require you to meet in person, while others can be obtained online. They can also vary in terms of interest rates so shopping around for the best offer is a good idea.
Getting pre-approved for a mortgage can take a few weeks to months. This is especially true for borrowers with low credit scores. Your credit score will affect your interest rate, so you should work to improve it before applying for a loan. Making sure that your credit card spending does not negatively impact your credit score is a great way to make the home-buying process a lot less stressful. Managing your monthly payment to lower the cost of your loan program is a great way to shave off any extra cost.
The loan type and loan program you choose is also a crucial factor in your monthly payment plan. Conventional loans, VA loans, FHA loans, and USDA loans all have different applications and pros and cons. Understanding the differences can help you determine which mortgage lender you want to choose.
- The conventional loan is the most common and is not connected to any federal government backing. This loan is a good option for a home buyer with a good credit report and tends to have a lower borrowing cost despite its higher interest rate.
- The VA loan is specifically targeted at both veterans and current military members. This loan type is backed by the government and makes the home buying process for both first-time buyers and non-first-time buyers much easier due to its no minimum down payment or credit score requirement.
- The FHA loan makes having a loan possible for people who do not have the money for a large down payment or a perfect credit report. There are requirements you must meet to meet this loan option but rates are conventionally lower than other options
- The USDA Loan is a rural-targeted loan option managed by the government. This type of loan does not require a down payment and will offer competitive interest rates. There are two main types of fees affiliated with this loan, the Upfront funding fee and the annual fee applying to your mortgage payments.
Getting pre-approved for a home loan is a significant step, and you should do your research before getting it. However, you shouldn’t overthink it. Many homeowners will simply not consider you for a loan unless they feel confident in your ability to meet their requirements. If you have a strong financial background, you’ll be able to find a lender to help you. Preapproval doesn’t happen overnight, but if you start the process early, you’ll have the financial ducks in a row.
Get pre-approved before you start house hunting and you’ll be ready to make your offer.
Research different mortgage options
If you’re planning on buying a new home, you should know that there are hundreds of loan options out there for you to choose from. Choosing the right one for you can save you money in the long run. The key is to take the time to research and compare loans before applying for a mortgage.
Although the number of mortgage quotes you can get may be daunting, there are ways to make shopping around easier on your wallet. For instance, there are loan programs that allow you to use a combination of a financial gift from your family and a down payment from your pocket to qualify. You should also do your homework and understand the advantages and disadvantages of each loan type before deciding.
A good way to get the best rates is to get pre-approved for a mortgage before you start house hunting. This will make you more attractive to potential sellers. It also means that you’ll have more cash on hand to shop around for the home of your dreams. And, if your credit is not all that great, you’ll be able to find lenders who can help you improve your credit.
In addition to shopping around for the best rates, you should also consider all the other costs associated with buying a home. For example, you may want to consider a buyer assistance program that can help you cover your down payment or closing costs. Also, you should investigate the best loan types, including fixed and adjustable-rate mortgages.
One of the best mortgage solutions for first-time buyers is to take advantage of the many government-backed loans available. These include the FHA loan, which has lower down payment requirements than other loan types and offers a variety of other advantages.
Consider hiring a buyer’s agent
A buyer’s agent is an invaluable resource during the home-buying process. An agent, although it takes more money out of your house fund, has knowledge of the market, which can help the buyer find a home that best meets your needs. He can also be an asset to help negotiate your conditions.
Buyer’s agents work on the buyer’s behalf and are responsible for protecting the buyer’s interests. They handle snags and deal preparation and will make sure they know what the buyer is looking for. If the buyer has a conflicting goal, the agent can point it out and try and reach a resolution.
Buyer’s agents can also flag listings that aren’t right for the buyer which eliminates a lot of the hard work you have to do. A good buyer’s agent knows the local area and can provide information on school districts, commuting options, and can recommend homes in a range of price points. Buyer’s agents are also familiar with real estate contracts which can help ensure that the buyers’ contracts are filled out properly.
A buyer’s agent can also recommend contractors and If the seller’s property has something wrong, a good buyer’s agent will work with the seller to fix the issue. The buyer’s agent can walk through the documents to make sure the details are correct.
They will work through everything, checking general statistics about the home, giving all information applicable to the buyer, and the sales prices of houses in the area to give the buyer the best understanding of their purchase they can. As Well as hiring a buyer’s agent, using online resources to locate houses is a great way to expand the number of houses that you can consider.
Make a list of your must-haves and nice-to-haves
It’s important to make a list of your must-haves and nice-to-haves before embarking on a house hunt. This will help you make a more informed decision on the types of things that are necessary and save you time and money. The list is not only a fun exercise, but it will also save you from making mistakes while shopping.
There are several things to consider when it comes to making a list of your must-haves. Some of these include the size of your living space, location, style of the house, amount of bedrooms, and square footage. Other items to think about that aren’t directly related to the house are parking options, distance from work, and access to main travel routes. If you have multiple cars, you might want to check on the amount of additional parking.
Make sure you have financing lined up and have a solid understanding of the local housing market and area around to ensure that the spot you and your realtor find is the perfect fit for you. Once you have made your list, you should start sending homes to your real estate agent. A good thing to remember is that there are a lot of houses to look at, and even if you love the first one you find, you should always check and make sure there isn’t a better option.
If you are a first-time buyer, you may not be aware of all the must-have and nice-to-have features of a new home. Talking to recent home buyers and long-time homeowners is a great way to find out the must-haves for homes. Something important to remember as well is as you get older, a home that is more accessible to you might be in order. All these factors come with time so talking to friends, family, and your buyer’s agent is a great way to become more knowledgeable about what you might want or need.
Even if your list is small, you’re still making progress by laying out your boundaries. The list helps you to determine what you can afford and find homes that match your budget and needs. Before you start searching, you should also learn about the local housing market, including the number of available homes and the current price range, a buyers agent can also help with all of this.