Five Tips for First-Time Home Buyers
Buying a home can be an investment in your future and the fulfillment of a dream. But before you start your house search, consider these five helpful tips for first-time homebuyers.
1. Know What you Can Afford
Even if you find your dream house, make sure you can afford all the related expenses. For example, home buying fees include closing costs, real estate fees and the down payment. Once you own the house, you will pay a monthly mortgage plus taxes, utilities, homeowner’s insurance, and maintenance.
To calculate the amount of house you can afford, use your current rent costs as a guide. Also, factor in your future goals and needs. For example, you may decide to buy a smaller home, so you have disposable income for travel or hobbies.
2. Improve Your Credit
Lenders consider your credit score as they prepare your mortgage preapproval letter, an essential part of the offer and negotiating process. Your credit score can also affect your down payment amount. So, it makes sense to improve your credit in the months before you buy a house.
First, request free copies of your credit reports and correct any inaccuracies. Then, aggressively repay debt until it totals less than 30% of your available credit. Finally, continue to pay all bills on time, and do not open any new credit accounts.
3. Save a Down Payment
A sizable down payment can help you win bids and reduce your overall mortgage. Also, a 20% down payment could help reduce your need to purchase mortgage insurance. Fortunately, you may qualify for assistance or loans that require a low-down payment.
Likewise, only offer a down payment you can afford. Remember that you may also need to cover closing costs, maintain an emergency fund, pay moving expenses, and furnish your new home.
4. Compare Mortgage Options
To land the best deal for your needs, compare home buying options and types of mortgage loans. Review details like qualification requirements and interest rates, too.
Conventional loans are the most common option. Select a fixed or adjustable interest rate and a term of 15 to 30 years.
FHA loans are ideal for borrowers with a low credit score. You could pay a low-down payment, too.
USDA loans allow you to purchase a rural or suburban home. Depending on your income, you could qualify for a loan with 0% down.
VA loans are offered exclusively to military personnel and qualified spouses. Investigate this option if you are an active-duty and retired member of the armed forces or National Guard.
5. Make Compromises
No home is perfect, so be prepared to negotiate your needs and wants. Details about location, property size, upkeep costs, and cosmetic factors can affect your decision.
Make a wish list of non-negotiable and optional factors. For example, you may insist on living close to work but be flexible on the floor plan.
Also, consider your long-term needs. For example, you may wish to purchase a home that requires little maintenance if you lead a busy lifestyle or ensure the house has enough bedrooms for your growing family.
Blog Credit to Our Partners: National General Insurance, an Allstate Company