Like any other big purchase, an effective homebuying experience is about making sure the details are settled from beginning to end. Keep reading some tips for first-time homebuyers that will help them navigate the process, save money along the way, and eventually, close the deal.
It is also a good idea to hire the professionals, such as The Ed Dale Team to help with this process. Other tips can be found below.
Save Money Early On
There are a few costs to consider when trying to save money for a home purchase. The first is the down payment. The amount that must be spent depends on the lender and mortgage selected. There are some conventional loans that are designed for first-time homebuyers who have great credit. In some cases, this will require a down payment of three percent or less. However, it is possible to get a smaller down payment, too. It is smart to use a down payment calculator to determine a goal and then set up automatic transfers to get the savings process started.
Another important cost is the closing costs. These are the fees and costs that are paid to finalize the mortgage. Usually, these range from two percent to five percent of the total loan amount. It is possible to ask the seller to cover a portion of the closing costs and be able to save money on some expenses, such as the home inspections, by shopping around.
The other costs that must be considered is move-in expenses. There is some cash needed to use after buying a home. Be sure to set aside money for home repairs, furnishings, and any upgrades that are needed.
Figure Out What is Affordable
It is important to figure out how much a person can spend safely on the house before looking at any properties. There are home affordability calculators that can be beneficial when it comes to determining a price range based on credit score, down payment, debt, income, and where the individual plans to live.
Check and Improve Credit Rating
A person’s credit score will determine if they are qualified for a mortgage and affect the interest rate that a lender offers. There are a few steps that a person can take to improve their credit rating before purchasing a house.
The first step is to get free copies of a person’s credit reports from the three main credit bureaus -; TransUnion, Equifax, and Experian. Be sure to dispute any errors that may be impacting the score negatively.
Another tip is to make sure that all bills are paid on time, and to keep credit card balances very low. Make sure that existing credit cards remain open. If a card is closed, it will increase the amount of available credit that is being used, which can reduce a person’s score.
Choosing a Mortgage
There are several mortgages available with different eligibility and down payment requirements. Some of the top categories include conventional mortgages, FHA loans, USDA loans, and VA loans. There are also options when it comes to the mortgage term. Usually, home buyers choose 30-year, fixed-rate mortgages. These are repaid in 30 years and have an interest rate that remains the same. With a 15-year loan, the interest rate will usually be lower than the 30-year mortgage, but the monthly payments will be higher.
Research the Various First-Time Home Buyer Assistance Programs Available
Some cities and states offer first-time homebuyer programs. These usually combine down payment assistance with low-interest-rate mortgages and even closing cost assistance. Some tax credits are also available with various first-time homebuyer programs.
Compare the Mortgage Fees and Rates
According to information from the Consumer Financial Protection Bureau, it is recommended that loan estimates be requested for the same mortgage type from a few different lenders. This allows someone to compare the costs, which includes possible origination fees and interest rates.
Sometimes, lenders may offer the chance to purchase discount points. These are fees that a borrower is going to pay upfront, which will help reduce the interest rate. Purchasing points is something that will make sense for those who have money on hand and if they plan to live in the home that is being purchased for a long time.
Get a Preapproval Letter
Mortgage preapprovals is the lenders offer to a person with specific terms. With a preapproval letter, it is possible for real estate agents and sellers to know, for sure, that someone is serious about the purchase. It can also provide an advantage over home shoppers who have not taken this step in the past.
A person should apply for preapproval when they are ready to begin shopping for a home. A lender is going to pull the individual’s credit and review the documents to verify their income, debt, and assets. Applying for preapproval from over one lender to shop rates is not something that should negatively impact a person’s credit score as long as they are applied for within a short period of time -; like 30 days.
Choose the Right Real Estate Agent
A good real estate agent is going to help to find the homes that best meet a person’s needs and then guide the individual through the closing and negotiation process. It is a good idea to seek agent referrals from other home buyers, too. Take time to interview several agents and ask for references for the best possible results.
When it comes to buying a home for the first time, there are more than a few factors to consider. Be sure to keep the information here in mind to ensure that the right steps are taken and that no serious issues arise with the work that needs to be done. Being informed and knowing what to expect is the best way to ensure that the desired results are achieved -; regardless of what a person wants or what type of budget they have to work with when buying a home.