Are you a first-time home buyer? If yes, then you are in for one of the most fulfilling experiences of your life. But like every other big project, you need to get every detail right, from start to finish for a successful home-purchasing experience.
As a first-time buyer, you may come across several new processes. At the same time, you also need to play your financial cards wisely so that not only your home purchasing but other expenses continue seamlessly too.
To help you navigate the challenging process, we have put together top 6 tips for a successful, first-time home buying experience.
1. Savings- Start as Early as You can
The decision to buy a home can never be a spontaneous one. It needs years of planning and saving to come off successfully. Hence, it is best to consider the main costs, work a budget and then start saving well in advance.
Some main costs include:
- The very first cost to consider is the down payment and this depends on the lender and mortgage you choose. Several conventional loans facilitate home buyers and those with an excellent credit can even enjoy as less as 3% down. While this might seem very feasible, truthfully even 3% can be a big sum to save for. For instance, if you’re buying a home worth $300,000, then your 3% down will be approximately $9,000.
Saving tip: Down payment calculators can help you set a goal and initiate automatic transfers to your saving.
- Next comes the closing costs and these include the expenses you have to bear to finalize the mortgage. Considering your loan amount, the fees and expenses will perhaps range from 2% to 5% of it.
Saving tip: Often, it is possible to ask the seller to pay part of the closing costs and you could try it too to save some expenses.
- Moving in does not end the financial considerations for home buyers. Soon after shifting, you may come across new upgrades, home repairs or furnishings to attend to and you will need a sum for that too.
2. Credit Building- Be Wise
For first-time home buyers, it is imperative to be smart with their credit handling. If you’re careless in this aspect, the lenders may very likely reject you on the basis of your credit score. In fact, apart from rejecting you, a poor credit score can also have an impact on the loan terms and interest the lenders will approve in your case.
If you’re a first-time home buyer, you can save yourself with some smart tips:
- Often many of us steer clearing of credit entirely but in the matter of home-purchasing, a good credit score can be beneficially. Try to main positive credit accounts since the beginning so that you contribute well to your score. Remember, positive scores open several feasible first-time buyer mortgages opportunities and they’d work wonderfully for you.
- It is crucial to avoid new credit lines close to your home-purchasing or when you’re closing to the deal. We do not recommend considering a new car-purchase or credit application for anything else because it can have a negative impact on your score.
3. Budget- Determine it proactively
When you’re about to purchase your first home, do not jump into the process unthinkingly. We know the excitement can make you rush through things but in this case, it is best to take each step after great planning and attention to details.
Hence, soon after the decision, you must review your finances in details. Take everything into account, including your debts, monthly income, monthly expenses, savings ratio etc. This will give you a strong idea of how much house you can or cannot afford.
Some general tips for this include:
- You can consider houses 5x times of your household income if you’re entirely debt free.
- You can purchase a home 4x times your household income in you give away less than 20% of it to down debts.
- Look at houses only 3x times your household income if you’re paying more than 20% of it to existing debts.
4. Research Away
Research about everything and anything before you start looking for your ideal house. You can get a pre-qualification check for your home loan eligibility by simply talking your mortgage lender. They will discuss about your asset information, employment status, credit and income.
A prequalification will help your ascertain what category of houses to look at because you will know what your financial boundaries are. Additionally, researching at length about the home-buying process in your state will enlighten you about the many laws and regulations that you might now be aware of otherwise.
You will also get to discover the insurance policies, HOA dues, utilities, property taxes and much more. It is imperative to invest time and effort into research before you dive into the purchase. You would otherwise not realize what property tax bills and other expenses look like because of your lack of experience in home-buying.
As a lead, county records prove quite informative too, while utility providers and insurers also provide helpful insight.
5. Assistance Programs
One more facility that many first-time home buyers are not aware of is the availability of several assistance programs. The purpose of these programs is to help first-time buyers by combining down payment assistance with low interest-rate mortgages and closing cost help too.
In fact, many of these programs also offer tax-credits to first-time purchasers.
6. Neighborhood and House Type- Weigh Pros and Cons
Along with your financial standing, you must also consider your lifestyle when purchasing a home. Consider the pros and cons of a single-family home against townhomes or condominiums. While the latter can be more affordable, you may not like the lesser privacy and wall-sharing with neighbors on a daily basis.
The point is to consider what you value the most in your ideal home and neighborhood, such as no neighbor disturbance, absolute noise and peace, home affordability, close proximity to workplace and schools etc.
In case of single-family homes, you must considers the repairs and updates you will have to manage singlehandedly. We call such homes the fixer-upper and they sell for less than move-in ready residences per square foot.
When you sit down and weigh each factor in detail coupled with the financial expenses, you get a clearer idea of what sort of financial plan, house type and neighborhood would be the best ever for you.
For the first-time home buyers, it is imperative to start the process with your long-term needs in mind. You must decide whether a forever home or a starter home is what you’re after before you align all other necessary processes for it. With our helpful tips to guide you, you’ll surely make a great head-start in your home-buying experience.