Purchasing a home can be quite a challenging task, especially for first-time homebuyers. For most people, it represents one of the most significant monetary investments they will make in their lifetime and they want to get it right.
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Unfortunately, the process can be quite complex and riddled with surprise expenses and unfamiliar technical terms.
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Here are 8 stellar tips for first-time homebuyers to make the entire experience less stressful and help you save some money along the way:
1. Start saving for your down payment sooner than later
In most cases, the down payment amount is 20% of the listed value of the house, but many lenders also permit much less than that now. Some first-home buyer programs may permit as little as 3% down payments.
But when you put down a lower amount at this stage, it also means you will be paying significantly higher interest rates and heftier mortgage installations.
Use an online down payment calculator, to know what amount you would comfortably be able to pay.
2. Check your credit rating
Your credit rating is one of the first things a lender will check when you apply for a mortgage loan and the approval of your loan hinges on this aspect.
In fact, this will also help determine what the loan terms and interest rate will be. This is why it’s best to check your credit score well before you start the buying process.
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If you have a low credit score, try to clear off existing debts etc. improve your credit rating and then apply for a mortgage loan.
3. Look for a home within a comfortable price range
When you start looking for your first home, it isn’t difficult to go overboard and buy something you can’t really afford.
This is why you need to determine what falls within a comfortable price range and don’t be tempted to look at anything outside that limit.
4. Get a pre-approval letter
In continuation of the previous point, it’s best to get prequalified; this gives you an estimate of the amount a lender may be willing to lend you based on your credit history, income, and debts. But once you start moving through the home buying process, it’s a good idea to get a preapproval.
In this, the lender minutely examines your finances and then confirms in writing the amount they are willing to lend you and on what terms.
Having this pre approval letter in hand gives you the upper hand over home buyers that haven’t taken this step; it indicates to the seller that you are serious about buying the property
5. Conduct some research on down payment options
Most first-time homebuyers struggle to come up with sufficient money for the down payment. But there are a number of good first-time home buyer programs out there such as the federal mortgage programs that allow loans that have only 3% down.
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In addition, there are Veterans Affairs loans and Federal Housing Administration (FHA) loans that you can apply for if you are eligible. You also have the option to approach close family members to loan you some money for making the down payment.
6. Factor in the closing costs
Most homeowners omit this aspect of the transaction. Apart from saving for the down payment, you would also have to budget for the amount required to close the mortgage and this can be significantly high.
These costs can range from between 2% and 5% of the total loan amount. The expenses you have to keep in view include title searches, building and pest inspections and homeowner’s insurance.
7. Set aside some money for after you move-in
Once you have sufficient money for the down payment and have factored in the closing costs, you need to have a comfortable cushion to pay for things that would need to get done once you move into the house.
This includes things like appliances, updated fixtures, furniture and furnishings as well as any other minor upgrades and additions you want to make once you start living in that house.
8. Consider the type of property to buy
If you want a more indoor space or a larger lot, you may assume you’ll purchase a single-family home. But if you feel that sacrificing space for extra amenities and lower maintenance is something that works for you; and you don’t mind paying a regular homeowners’ association fee, a townhome or a condo may be a better fit.
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In addition to all these things, look for a safe neighborhood that has a positive vibe, good schools, shopping centers and an efficient transportation system, hospitals, supermarkets, and pharmacies etc.
Make it a point to drive through the neighborhood at different times on different days to check out the activity, noise and traffic levels.
Following these tips will help you find a house that’s best-suited to your needs and one that you will be able to comfortably pay for in the long term. Do you have any tips for first-time homebuyers? Sound off on The Shannon McCarthy Team Facebook Page, or our Twitter, Instragram or LinkedIn feeds. And don’t forget to sign up for our monthly HOME ADVICEtm email newsletter for articles like this delivered straight to your inbox. You may unsubscribe at any time.