For many people buying a home is one of their top aspirations/goals in life. It is often the main influencer for how people go about their business, financial, and personal lives. Big life decisions like buying a home for the first time can be intimidating. It is important not to rush the process and take it step by step. Here are my 6 key tips for first time home buyers.
- Calculate a budget for how much you can spend on a house
- Before you fall in love with a house it is important to check your monthly budget and determine how much you can afford for a home. It is important to consider all of your current expenses and monthly debt payments to figure out how much money you can allocate to your mortgage. Most banks require that no more than 28% of your monthly take home pay should be spent on your monthly housing costs.
- Research your options for a down payment
- For a lot of buyers, the down payment is a factor that influences how much they can afford to borrow for a home. Making a larger down payment means smaller monthly payments and you will end up paying less interest over the life of the loan. Some people believe you can’t buy a house without a down payment of 20% or higher. This is simply not true and there are several programs available to both first time and repeat homeowners that offer little or even no down payments. Contact you loan officer if you would like to learn more and find out what you qualify for.
- Research to find the right home for you
- After you have established how much you can afford, you are ready for the exciting part of finding the home. Besides your budget there are a lot of factors to consider when looking for the right home such as: family size, the type of neighborhood you want to live in, and school situations just to name a few. You should also consider the features of the house that you consider as essential such as: square feet, number of bedrooms, garage, and fenced yard. Identifying these factors will narrow down the housing search for you.
- Find a good realtor
- A good realtor can make your home buying experience smooth and simple. 54% of buyers found their realtor from a personal referral from family, friends, coworkers or had used an agent they worked with before. A good realtor has knowledge of the market, will have contacts for loan officers and real estate attorneys, and is a great time saver.
- Get pre-approved
- At this point in the process you have established your budget, what kind of home you want, what neighborhood you want to live in, and what type of loan you should receive. In today’s competitive housing market, it is important to get a mortgage loan pre-approval. Being pre-approved means that your credit report has been analyzed, your income has been verified, and you have been approved for a loan by your lender. Having a pre-approval letter lets the seller know that you are serious and gives you bargaining power which could give you the upper hand over other buyers.
- Prepare for closing costs
- Lastly you should prepare for closing costs. After the seller accepts your offer the closing process begins. The average closing process takes around 43 days. It is important to save up for your closing costs as well. Closing costs are usually around 3-4% of the purchase price of your home and they include: appraisal, home inspection, credit report, attorney, and homeowner’s insurance.
Good luck in the home buying process!