Tips and Tricks for First-Time Homebuyers
The homebuying process is notoriously complex. According to the National Association of Realtors, for nearly 1/3 of buyers, who are house hunting for the first time, it may seem next to impossible. From industry jargon to bidding wars to 30 years of mortgage payments, most first-time buyers could use a little guidance. Here’s how to stand out from the crowd and build a white picket fence on your own little slice of the American Dream.
Be prepared to act quickly
Lower home prices, higher inventory and lower mortgage rates mean buyers can expect fewer bidding wars than years past. Keep in mind, however, that it’s not a buyer’s market quite yet. You’ll still want expert help to find the perfect home and close as quickly as possible, especially in peak season.
Know your credit score
Credit paints a picture of your history as a borrower and is a considerable factor in qualifying for a home loan. Request a copy of your credit report from TransUnion, Equifax and Experian. Comb through each report and work to resolve any errors long before it’s time to make an offer. Getting a mortgage despite a lower credit score is possible, but the credit score improvement process can be time-consuming and complicated. It’s best to get started as soon as possible.
Forget the 20% down ‘rule’
While larger down payments may be better in terms of potentially lower interest rates and spend over time, 20% is not a hard and fast rule in order to qualify for a home loan. In fact, depending on the type of loan you qualify and apply for, it’s possible you could bypass a down payment entirely. Explore your loan choices and determine which is best for you. Common options include Federal Housing Administration (FHA) loans, conventional loans, VA loans and USDA loans.
Find the right mortgage professional
Not just any mortgage professional, the right one. Weigh aspects such as cost, flexibility and scope of services. Explore mortgage options from your local bank and consider a mortgage broker, like a loan originator who can work with multiple lenders and recommend the best option to fit your personal situation.
Get pre-qualified before you start house hunting
A pre-qualification letter helps focus your search, particularly in terms of price point, and identifying potential roadblocks, such as having too much debt. You’ll also stand out from buyers who haven’t gone through the pre-qualification process,and could be prepared to make an offer as soon as you find your dream home.
Stick to your budget and account for all expenses
Speaking of price point… Budgeting is one of the most important steps in the homebuying process. If purchasing as a couple, have an open conversation about individual and collective finances to gauge how comfortably you could afford certain payments. Your budget should consider any outstanding debts, food, transportation, insurance, utilities, down payment and closing costs, and perhaps even a miscellaneous fund. Once the budget is set, it shouldn’t budge.
Keep an open mind
Some first-time buyers on a budget may find themselves ditching reality for HGTV. Make a list of wants and needs, strictly within your budget. Remember that cosmetic replacements and updates are always a possibility, and even add a touch of character. To quickly build potential equity, you could even invest in a fixer-upper!
House hunt for the future
That said, it may be a good idea to consider a home with a little room to grow. You never know when pets, children or career changes could come along and crowd a two-bedroom. Try to envision your life five years from now and shop accordingly.
Schedule a home inspection
Protect yourself and your investment with a home inspection. A certified home inspector can identify structural, electrical and plumbing problems, like faulty wiring, termite damage or cracks in the foundation. Inspections come at a relatively small price for bargaining power and an in-depth understanding of your home.
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