First Time Home Buyer Tips

Buying a home is probably the biggest purchase you will ever make. Needless to say, it is an exciting time but can also become very stressful specially if you are unsure what to expect. To make the home buying process go more smoothly and keep you on track we have compiled some simple tips.

Get your credit in order.

Your credit score is perhaps the most critical element of the home buying process. Familiarize yourself with your credit report, check for any mistakes, and make necessary disputes. Pay off as much debt as you possible can and look into other ways of improving your score such as applying for a secure card or an additional credit card. While many loan products may not require a very high credit score, chances are the better the score the lower your interest rates. Finally, once you are ready to purchase your home do not neglect your payment due dates, make unnecessary purchases, or open new accounts. Changes in your credit from the time of application to the time of closing could potentially hinder the home buying process.

Start saving.

Many loans do not require the typical 20% down payment but you may still want to consider this in order to keep your overall monthly payments lower and also to avoid private mortgage insurance. Even if you decide against putting 20% down on your home, you may still need at least 3% down depending on the mortgage product you qualify for.

There are other expenses you should start saving for aside from the down payment. Closing costs for example, can be anywhere from 2% to 5% of your loan amount. You may also want to have some money set aside for things like moving expenses, furniture, appliances, and small repairs.

Do your research.

Don’t get caught up on the small details like floor type of paint color which can be changed rather quickly. Do some research on the actual home like what year it was built, how old the a/c unit is, whether or not they have impact windows or hurricane shutters, when the roof was last replaced or fixed. Research the neighborhood and demographics as well. How long is the commute to work? What are the school ratings like in the area? Is it a safe location? Is it close to restaurants, gyms, grocery stores, and any activities you like to enjoy?

You also want to think long-term when purchasing a home. How long do you see yourself in this home? Is there room enough to grow? Could it be a good investment property in the future should you decide to purchase an additional home? What is the potential resale value of the property?

Some additional things to consider are HOA fees and what these include, how high property taxes are in the area, and if the area is prone to flooding or erosion.

Compare mortgage rates and options.

Comparing mortgage rates, mortgage options, and mortgage fees from at least three lenders is ideal. You can get these rates from your bank or independent mortgage lenders. As far as mortgage options, most home buyers tend to go with a 30-year, fixed rate mortgage but there are many others that may better fit your specific needs such at a 20-year fixed, or 15-year fixed. Adjustable rate mortgages pose more risks but offer a lower interest rate for the first few years.

Of course, finding a qualified lender is also crucial. Don’t be afraid to ask questions and ask for clarifications. A great lender should be knowledgeable and able to clearly and confidently explain the different options and rates, and recommend what is best for your specific situation.

Decide what you can afford and get a preapproval.

If you are serious about buying, a preapproval letter from your lender will help you stand out amongst other buyers who may not have taken this step. In order to get preapproved your lender will examine your finances and confirm in writing how much you qualify for and with what terms.

In addition to a preapproval it’s smart to take a hard look at your finances and situation and decide for yourself how much you can afford. Your lender may qualify you for $300,000 for example, but you may feel more comfortable with $250,000 so you can have extra money for savings, vacations, or other expenses. Typically, it is recommended that your housing payment be no more than 28% of your income. Remember to take into account expenses such private mortgage insurance, taxes, and HOA.

Find assistance programs.

There are countless assistance programs offered to first time homebuyers either on a state or local level. These programs can help with anything from down payment, to ensuring lower interest rates, and even helping with repair costs. Again, do your research, contact your local housing authority, and attend local home buyers’ educational events and seminars. Even your local library can be a great source for information on assistance programs.

Choose a real estate agent.

The best way to find a great agent is by asking friends and family for referrals. Some important things to consider when choosing an agent are:

  • Their licensing and credentials
  • Length of time in the business
  • Areas they cover
  • Can they handle your specific, unique situation?
  • Are they willing to provide references?
  • What are their current listings?

Choosing the right real estate agent is crucial for your home buying experience. Just as when choosing a lender, make sure to take your time, compare, and choose wisely.

Homeowners insurance.

With as much time and care that goes into finding and purchasing your home, the best and most important thing you can do is to protect it with homeowners insurance. There are many types of coverages to fit your needs as well as supplemental coverages not included in a homeowners insurance policy such as flood insurance, and Cat4Home Hurricane protection.

The best piece of advice in the home buying process is to be patient. Take your time to do your research and be prepared. Before you know it the keys to your dream home will be yours.

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