Thirty-three percent of US homebuyers in 2018 were first-time buyers.
Buying your first home is an exciting time in your life, but you can’t let emotions get in the way of making sound decisions. Instead, you need to fully research everything about the home buying process before signing a mortgage.
Are you a first time home buyer? Before you purchase, you need to know these tips to avoid any mistakes! Keep reading to learn more.
1. Plan Ahead
When you first start looking to buy a house, you need to really plan ahead.
Buying a house isn’t something most people accomplish in a few weeks. It can take months to plan, find the right house, and complete the home buying process.
The first step is to get pre-approved for a mortgage.
A pre-approval is your best tool when negotiating with a seller, it lets them know you qualify for a mortgage and can afford their home.
To get pre-approved, you’ll provide your lender with your credit score, employment history, and income details. Your lender will then give you a mortgage dollar amount that you qualify for.
Also, when you first start considering buying a home, you need to start saving for down payment ASAP.
Some mortgages allow you to put as little as 3 percent down as a home, but the typical down payment falls between 10 and 20 percent. Remember, that the more money you can provide as a down payment, the cheaper your mortgage payments will be each month.
2. Study the Location
As a first time home buyer, you need to find the right location before you start looking at specific homes. The last thing you want to do is fall in love with a house that is in a horrible location.
Here are a few aspects of the location you should consider:
- Proximity to your workplace
- Crime rates
- School district
- Closeness to stores, entertainment, etc.
Once you find a specific location or town you want to buy in, then start studying the different neighborhoods. Visit the neighborhoods at different times of day to get a true sense of the environment.
Buying a home is very different than renting because instead of an annual agreement, you are agreeing to a long-term mortgage.
That’s why it’s so important to find a location that you and your family will love for years to come. Learn more about all the advantages of buying versus renting if you’re still on the fence.
3. Always Get an Inspection
One of the best first-time tips for homebuyers is to always get an inspection.
While many sellers provide their own inspection report to buyers, you should always receive your own inspection.
Make sure you go beyond the basic inspection and check out all aspects of the home. You should get a roof inspection, foundation inspection, water inspection, and a radon test.
While a thorough inspection costs more, it can save you thousands of dollars if they spot an issue with the home. Make sure to shop around for a reputable inspector in your area that has good reviews.
This is a major aspect of the home buying process that you don’t want to cut corners with.
Remember, that if the inspector does find an issue, it doesn’t mean you need to walk away from your dream home.
The inspection report can give you major negotiating power when it comes to the buying process. Try to negotiate the price of needed repairs off of your home purchase process.
4. Research Different Mortgage Options
First-time home buyers need to research the different mortgage options available to them.
Most mortgages fall into two major categories: conventional or government-issued.
Conventional mortgages are not insured or backed by the government. To get around this, most lenders require you pay mortgage insurance until you have a certain percentage of equity in your home.
Government-issued mortgages included FHA, USDA, and VA loans. Depending on your situation, you could qualify for a government-issued loan. These can result in a lower down payment or lower interest rates.
Once you figure the type of mortgage you want, you then need to decide on a 15 year or a 30-year mortgage. While a 15-year mortgage comes with higher monthly payments, you will pay significantly less interest over the course of the loan.
Use this mortgage calculator to figure out which option is best for your situation.
5. Save for Closing, Moving Expenses
On top of saving for a downpayment, don’t forget to save for closing and moving expenses. These expenses often surprise first time home buyers.
Closing costs can range from 2 to 5 percent of your home’s purchase price. This includes fees for:
- Closing fee
- Underwriting fee
- Application fee
- Prepaid interest
All of these items can quickly add up.
On top of closing costs, you need to save for moving expenses. This can include a rental truck, movers, and moving supplies. This can and any renovations your home needs before you move in, like paint or new carpet.
Be a Smart First Time Home Buyer
If you follow this advice before buying your home, you’ll be a smart first time home buyer.
Remember to plan ahead if a new home is in your future and study the location thoroughly.
When you find a home you like, always get an inspection and research the available mortgage offers before signing on the dotted line. Lastly, save up money for closing and moving costs so you don’t get caught by surprise!
Have more questions about the home buying process? Check out our realty blog for all the best advice.