Whether you are ready to buy a starter home for a growing family, tired of renting and want to put your rent towards a mortgage, or just at a point in your life where you want to buy your first property, you will feel like you are entering the unknown as a first-time homebuyer. Most buyers who just wrapped up their first home purchase will tell you that there were many tips they wish they knew going into the process. But don’t fret. With the right information, you can enter your home buying journey well informed and prepared so that you have a smooth experience from start to finish. Read on below to learn 8 tips for buying your first home.
Steps to take before you start house hunting:
1.) Start saving well in advance
With a home purchase comes a down payment. The down payment will range based on the mortgage lender that you choose, but most first-time homebuyers will put down 20% of the house price. If you opt for this route, Credible notes that it takes about 6.5 years for the average American homebuyer to save this. If you are looking for a lower rate, you’ll find that some loans offer a first-time homebuyer assistance program that requires a much lower down. Be mindful that even a smaller down payment still can be challenging to save for. For example, NerdWallet notes that a 3% down payment on a $300,000 home is still $9,000. Whatever loan you choose, the best way to tackle saving is by setting up dedicated savings account for your home purchase. Once you do that, look at areas of your life that you can cut back on to save.
2.) Know your credit score
One of the components of a pre-approval for a mortgage is your credit score, which can directly impact the interest rate you will be offered. Check your credit score and if it is low, put in the work to get it up. Lenders will also look at your credit habits as well as your score so focus on paying your bills on time, keeping your credit balances low, and keeping your current credit cards open. Continue tracking your credit score to see how it improves and keep adjusting your habits until your score reaches a higher level.
3.) Set a budget
Before you begin house hunting, you’ll want to know how much you can realistically afford based on your income, current debt, down payment, credit score, and where you plan to reside. NFCC advises not only crunching the up-front costs, but also ongoing costs like what your monthly mortgage, property taxes, utilities, home maintenance (i.e roof repairs), home insurance, and any HOA fees would be. You’ll want to make sure you can cover all these costs before you purchase a home. And once you get a pre-approval letter, Realtor.com advises staying mindful of your budget because just because your pre-approval letter says you can afford a certain home doesn’t necessarily mean you should spend all of that money on a new home.
4.) Research desired neighborhoods
Your perfect dream home can quickly turn into a nightmare if you don’t live in a neighborhood that you love. Before you make an offer, do your research. Take a walk around the neighborhood, talk to the neighbors, and look at what your commute would be, how the school district is if you are starting a family and the town’s crime rate. These are all important considerations to take before making a purchase.
5.) Explore mortgage options
Don’t choose the first lender you stumble upon. Instead educate yourself on the wide array of loans available, including first-time homebuyer assistance programs. Knowing all your options will make narrowing down a lender more manageable. Gather mortgage quotes from 3-5 lenders so you can look at a range of interest rates, added fees, and discount points. Once you select your lender, you’ll have access to a preapproval letter that will formally list how much you are qualified to buy. This letter will show that you are a serious buyer and that you can afford the home you would like to purchase
Steps to take while house hunting:
6.) Work with a real estate agent
As a first-time homebuyer, you won’t want to navigate this process alone. So, for our next tip for buying your first home: choose a real estate agent that not only specializes in your desired neighborhoods but also your price point. You want someone with a repertoire of knowledge of what homes are selling for and what a competitive offer will look like. They’ll be able to help you price your offer, recommend other neighborhoods you didn’t consider previously, handle setting up tours and negotiations, and will draft up your contracts.
7.) Don’t skip the home inspection
In a competitive market it may be tempting to skip a home inspection, but don’t fall into this trap. Especially with your first home purchase, you’ll want to have a thorough assessment of the foundational structure and mechanical systems. These inspectors are trained to look for potential problems, like a roof that needs to be repaired, and with their findings, you can make an informed decision about purchasing and have the power to renegotiate your offer with the seller.
8.) Negotiate with the seller
One way to potentially save money is to negotiate with the seller. If from the home inspection you uncover a repair, like a roof repair, you can attempt to ask the seller to pay for the fix in advance or ask them to lower the price of the home to cover the cost of the repair you’ll need to make. You can also ask the seller to pay some of the closing costs but know that all this likely depends on how competitive the market is.
If you’re ready to start your first-time home buying journey, Lantern Real Estate Group can help. Our team will make sure you feel supported and make sure that you have a trusted resource as you navigate this incredible milestone purchase!
Visit Lantern Real Estate Group to chat with us today!