Tips for First-Time Home Buyers
Buying a home can be challenging for first-time buyers. It is not only about having the finances, but it is much more than that. As a first time buyer, it is perfectly natural for you to be anxious since the purchase you might be making is an expensive one.
In order to make sure your buying process remains smoother than ever, read a run-down of all the steps to buying a house for the first time. We’ve included saving tips, financial calculations, and ways to find the ideal home for yourself. Not only are the tips designed to make life easier, but they also exist to make sure your investment is worth each penny:
Start Saving Early
When you are buying a house, capital is probably one of the primary requirements for your purchase. Due to this, it is recommended to begin saving early so that you are left with a ton of bank debt in the future.
Your down payment will solely depend on the type of mortgage you choose. Some loans that encourage first-time buyers to proceed with their purchase require as low as a 3% payment. However, even the smallest percentage can be challenging and difficult to save. If you do calculations on a $300,000 house, 3% of the total amount will be $9,000 which can be a hefty amount for many. Calculate your down payment monetary flows and decide a goal on how much you can afford. Once that is complete, you can set up automatic transfers from checking to a savings account to get you started.
Additionally, you will also be incurred with fees and expenses that you pay to finalize your mortgage. Typically they range from 2% to 5% of the loan amount. Even if you ask the seller to pay some portion of the closing cost, you will need to make sure you have some extra cash for this payment.
Lastly, cash requirements don’t just end after you move into your house. Once the house is set, you may want to add in some upgrades or new furnishing material. Due to this, more cash will be required as move-in expenses.
Calculate Your Finances
Now that you are aware of all that you require money for, calculate your overall finances and budget to understand how much you can actually afford. Set up a price range of your home with your income, debt, down payment, credit score, and the location where you plan to live. All of these factors matter and they can significantly impact your budget model.
Exploring Mortgage Options
There are a number of mortgage options you can consider that have varying down payment and eligibility criteria. Some of them include:
· Conventional Mortgages: These are not guaranteed by the government, but include conventional loans for first-time buyers that go at as little as 3% for downpayment.
· FHA loans: Administered by the Federal Housing Administration, FHA loans allow down payments as low as 3.5%.
· USDA loans: Most suited and eligible for rural home buyers, this loan criteria is insured by the U.S. Department of Agriculture.
· VA loans: Guaranteed by the Department of Veteran Affairs, such loans are for veteran military service members and require no down payments on most occasions.
When selecting mortgage options, also consider the time period you opt for. Most buyers select a 30-year fixed mortgage rate which is paid off in 30 years with an unchanging interest rate. Moreover, a 15-year mortgage usually has a lower interest rate, but with higher monthly payments.
Compare Various Mortgage Rates and Fees
As you begin to study your mortgage plan, make sure you compare several loan estimates for the same type of mortgage from different lenders. This would help you to compare costs, including interest rates and other fees.
Some lenders also offer discount points which include a large fee that a borrower pays upfront in order to opt for a lower interest rate. This works if the borrower has more money to pay upfront and plans to stay in the house for a long time.
Research for an Experienced Realtor
A well-experienced real estate agent will search the markets for a home that best fits your needs and requirements. Moreover, they will also guide you on negotiations and closing process, making the buying process easier for you to begin with.
You can opt for a well-experienced real estate agent by opting for referrals from recent home purchasers. Furthermore, interview a few and ask them for client references. Your questions don’t need to challenge their experience in any way, but simply ask them how they deal with first-time home buyers.
Study the Neighborhood
You may fall in love with a house but not its neighborhood. Or vice versa. Either way, the surrounding environment around the house plays a major role in the lifestyle you are going to get. If you have shared walls with neighbors, there would be more security but less privacy available.
Think about how long you plan to live in the new house, how many people you are, and if you are planning to expand your existing family. By figuring out your long-term goals, you would be able to choose a house with the ideal type of amenities you require. It is always better to move into something ideal beforehand, before rushing to switch houses in the last moment.
Research on Your Own
While your real estate agent is scouring houses for you, make use of your own research skills to find some living spaces. Online 3D home tours have become a rising trend in the current year and they allow you to virtually explore a house on the market. This means you can observe each detail about the house and explore it at any hour of the day simply by using your smartphone or laptop. Unfortunately, you will not be supplied with information that you’d receive upon visiting the house physically, but online tours give you a large sense of what to expect.
Opt for Home Inspection
Most people don’t opt for this because of the added expenses that come with it. However, paying for a home inspection will be more useful than you think. It would help you to make an informed decision about your purchase and give you an idea of any structural or mechanical changes need in the home.
The inspector you hire should be able to go to every part of the house such as the roof or tiny crawl spaces. If you attend the inspection also, you can also ask the inspector to study spots that may seem vulnerable to you. Moreover, remember to ask as many questions as possible. Make sure you are well-versed about a home before making your purchase.
Steps to Take After the Purchase of Your First Home
Now that you’ve signed the papers, paid the movers, and are ready to move into your new place, the game doesn’t end here. You may feel like you are done, but there is much more you need to consider. We’ve devised a small list for you to make sure the moving and settling process also remains smooth for first-time home buyers:
Your saving does not end simply because you purchased your first home. You may be encountered some unexpected expenses around the house for which you’ll need money for. In such a case, set up an emergency fund so you are not stressed when unexpected funds do rise up.
As a first-time home buyer, you’ll want to make sure you take care of it like your own child or pet. Continue to do regular maintenance around the house to decrease unexpected repair costs and fix problems while they are small and manageable.
Ignore the Housing Market
You probably spent weeks, months, or even years searching for a house that fits your needs and budget. This means that your laptop or smartphone may be filled with unclosed tabs and searches on several websites, trying to explore options throughout your time. It is now time to enjoy your new home and ignore the current market trends unless you’re looking to move very soon.
Questions First-Time Home Buyers Must Ask Themselves
As you just read the steps you need to consider, there is never a moment where you won’t question your purchase. Moreover, you might even have doubts about whether a real estate agent, mortgage plan or even the house is worth the money you’re spending. Due to this, we’ve streamlined some basic question you should be asking yourself before you consider buying a house:
· How is my financial health?
As stated above, you need to be prepared with the home purchase and ongoing expenses during the shifting process. By studying your savings, ongoing spending, and credit score, you’ll have a much better idea of how your financial health is.
· What type of house do I need?
Whether you want a condo, townhouse, duplex or a multi-family house with more than two units solely depends on your requirements. Consider your family size and see what works best for you. Lay out your goals and formulate the pros and cons of each type of house you might be interested in buying.
· What features do I want to see in my house?
As a first-time buyer, it is justified to want a house with specific features that you may like. Make a list and include all the basic desires such as the type of neighborhood, size of the front porch, how many bedrooms you require, etc.
· How much of the home can I afford?
In some cases, the bank will give you a higher loan than what you initially asked for. Even if that is the case, taking all the money at once is not the best possible option. If you have enough up-front cash for the down payment, make sure you go for it and not borrow a huge amount in the beginning. You don’t want to be left stressed after your purchase and want to make sure all monthly mortgage payments run as smoothly as your budget.
· Who are the key players I need for my purchase?
Some of the key players you’ll need for purchasing a home for the first time are real estate agents, home inspection teams, lenders, and your family. Each of these plays an important role throughout the purchasing process and helps you to make your decision with less burden.
All first-time home buyers must know some basic steps to buying a house for the first time. Such steps are a way to guide them and make sure their purchase remains worthwhile. If you’re a first-time buyer, we hope this guide was useful for you. Remember, this will probably be the biggest purchase of your life, so don’t rush into anything. As you take your time, you will enjoy the process the same way you enjoy your new home.
A first-time home buyer can learn about the financing options with Maronda Homes online.