Purchasing a house can be stressful for first time home buyers. It a huge investment that could take thousands of dollars. There is also a complicated process.
First, you need to look for and choose a suitable house. Then you must negotiate the selling price with the seller. You may also have to compete against other home buyers if many people like the house.
You also must find the best available mortgage based on your credit history. Finally, there are also a lot of legal hoops to jump before the house is yours.
But following a proper home buying guide can reduce a lot of first time homebuyer stress.
Keep reading for 5 of our best first time tips for buying a house
1. Save for a Down Payment
As a first-time homebuyer, having a sizeable down payment could help you get a better mortgage interest rate. This will reduce the amount you must payback.
Some lenders ask for down payments of up to 20% of the loan amount. So it is important to have a sizable amount saved. Paying larger down payments also increases your chances of getting a mortgage if your credit rating is low.
Many people that end up with larger loan amounts than the value of their homes paid a small down payment. It’s best to avoid ending trapped with your loan and unable to move or sell your home.
2. Shop Lenders for the Best Mortgage
One of the most important first time tips for buying a house is to get a home loan preapproval letter. Having a preapproval helps you to know how much you can afford to pay for a home.
Sellers and brokers will also take you seriously as they can see proof of your readiness to buy. In case you see a home that you love you will also be able to put in an offer immediately and beat off any competing buyers.
Getting a preapproval letter before you even start shopping for a home could also reveal pitfalls that you may be unaware of. For example, you may end up finding out that your credit history is marred by student loans or even identity fraud.
When looking for a mortgage make sure you approach several lenders. Your bank may not value you as much as you would expect so do not accept their first mortgage offer. This important first time tip will help you find the best mortgage terms possible for your credit history.
Finally, when signing up for a home loan ensure that you can afford the monthly payments. Your monthly loan payment combined with monthly property taxes and insurance should not exceed 25% of your monthly income.
3. Sign Up for Government Home Buyer Programs
The American government offers a lot of support for first time home buyers. For example, they provide home buyer loans such as USDA, VA, and FHA Loans.
These require a lower credit rating or down payment than commercial loans. Other popular options include the HomePath Ready Buyer Program and loans through Fannie Mae and Freddie Mac.
Another helpful homebuyers’ first time tip is to check with your local authority if they are offering any deals for homebuyers. Sometimes they may offer low mortgage rates or sell houses at low rates if they want people to move to an area.
4. Budget for Closing Costs and Emergencies
Another of the most important tips for buying a house is to set aside a budget to cover closing costs. This is also for any emergencies that come up after your home purchase. Experts estimate that closing costs could come to around 2% to 5% of the cost of your house.
These costs include home inspection fees, appraisal fees, loan origination fees, insurance, homeowner’s association fees and property taxes. While your homeowners’ loan could cover these fees, it is advisable to pay them upfront to cut down on loan interest payments.
On top of your closing costs, you should also remember to budget for is moving expenses. Moving can end up being expensive, especially if you have many items or if you are making a long-distance move.
You should also set aside an emergency fund to cover home repairs. Accidents happen and your home may need an emergency repair. Always having an emergency fund of about 1% of the value of your home could come in handy in such situations.
The emergency fund can also pay mortgage fees for a short period in case you lose your income. Defaulting on your mortgage payments could cause you to lose your home. So it is important to have contingencies in place to always make your payments.
Another way to cushion yourself in case of emergencies or unexpected costs is to have small investments that could be cashed in to make unexpected payments. A bitcoin option chain could be such an investment.
5. Be Proactive About Your Property Search
Having a real estate agent is a great idea when looking for a home to buy. But most home buyers find their homes by themselves through an online search. A recent study found that 50% of home buyers found their current home online. Meanwhile, only 28% found their homes through a property agent.
To increase your chances of success you should use both options as well as engage several property agents. Also, attend as many open houses as you can and do your research on neighborhoods to identify the best place for you to stay. You never know how you will find your dream home.
Follow These First Time Tips for Buying Your Next Home
Buying your first home is a very exhilarating experience. It can also be overwhelming due to the many requirements that must be met.
Buyers’ remorse on property worth thousands of dollars can be very depressing. So take your time before closing a home purchase deal.
To get the best mortgage rates, compare offers from several lenders, pay down your debts, and aim to save around 20% down payment. Also, work on improving your credit history.
For more first time tips on buying houses read the rest of our blog.