A lot of factors affect homebuyers to shop for a home. It can be for investment, a job offer, or simply getting out of renting and wanting to start homeownership that can be passed down to generations.
Whatever your reasons are, there are a few steps that you want to keep in mind before enjoying your first home. Here is our best advice for first-time homebuyers:
1. Be Committed to your loan
The most important tip we can provide you is to make sure that you are ready. Ready to pay for a downpayment, closing costs, and most importantly your home loan. The average mortgage loan term is 15 – 30 years. You may not be staying in your home for that long, still, you need to be committed to paying your loan. Be 100% sure that you’re ready for homeownership before you take on a mortgage.
Here are a few questions you should ask yourself:
- Are you ready to commit to this home and city for at least 5 years?
- Do you have an emergency fund that can cover at least 3 months of your expenses?
- Do you have a stable income to pay for your loan?
If your answer is “no,” you may want to hold off for now. Keep saving and researching for now.
2. Be Pre-approved
It can be tempting to jump right into house hunting, especially if this is your first time. It’s better to get a mortgage preapproval before you begin your home-buying process.
Pre-qualification is different from being Pre-approved. Let’s compare.
Prequalification letter: A prequalification is an estimate of the amount of home loan you can get. It’s based on an informal evaluation of your income and other information.
Preapproval letter: A mortgage preapproval is a document from a lender that tells you exactly how much loan money you can get. It’s based on your financial information, such as W-2s, bank statements, and your credit score.
3. Maintain Your Credit
Do not open a new line of credit. When you apply for mortgage preapproval, lenders check your credit report. They’ll do it again before you close on the house and its corresponding mortgage.
If they see that you’ve taken out another loan or line of credit and your credit balance has increased or that you’ve started to make late payments, it could affect your chances for final approval.
Pay your bills on time and don’t try to influence your score for better or worse. Also do not splurge on unnecessary things. Lenders will want to see that your behavior patterns are consistent and you can be trusted to be able to pay off your loan.
4. Save money for a Down Payment
The more money you can put down on the purchase price, the less your mortgage loan will cost and the easier it is for you to pay it off.
5. Know your Loan Options
There are different types of Mortgage Loans. The type of loan you choose will determine your down payment amount, what type of home you can buy, and more.
6. Don’t Forget Closing Costs
You also need to be prepared for Closing costs before you can take control of your property.
7. Focus on your needs, non-negotiables, and nice-to-haves
Your reason for buying a home is vital in making decisions about your purchase. If your goal is real estate investment, a duplex may be the perfect option for you.
If you’ve decided to move closer to your parents or a support system as you start your own family, consider a condo or townhouse that will require less upkeep.
8. Work With A Licensed Real Estate Agent
Work with a real estate agent or REALTOR® to find the perfect property. Agents and REALTORS® are local professionals who are experts in the home buying process and your local market.
A real estate professional can help by:
- Showing properties in your desired area that fit your needs and budget
- Attending showings with you and focusing on your priorities as a home buyer
- Helping you decide how much to offer for a property, they know best in terms of the market
- Submitting an offer letter on your behalf
- Negotiating with the seller or the seller’s agent after you submit an offer
- Attending the closing with you to make sure that everything is in order with your sale
Your Agent must be working in your best interest to get you the perfect home. Choose wisely.
9. Be Confident With Your Offer
Be committed to the purchase, make sure that you are confident with the price you have put down on the offer – or you could risk losing your earnest money deposit. Giving this money is a sign of your sincerity in purchasing the home.
The deposit is typically equal to 1% – 3% of your total home loan value and goes toward your down payment. If you back out of the sale for a reason not listed in your offer letter, you’ll lose your earnest money deposit.
10. Hire An Inspector
Hire a professional inspector before you get home. An inspection is different from the appraisal required by your lender.
11. Know your budget and Stick to it
Many first-time homebuyers get too invested in a home only to find out they can’t get the loan for it or there are some major issues. Make sure that even though there are things you wanted on your first home, you know that you have a certain budget to stick to, to avoid heartaches and disappointment.
12. Save Physical Copies Of Your Paperwork
These documents are very important, make sure that you keep them in case of emergencies.
Let anyone else named on your loan know where the documents are and how to access them.
13. Keep on Learning
Even after having your first home, research how you can know more about real estate and how it can benefit you and your family whether it be financially or emotionally.
Besides, you already started your home buying journey and I doubt it will end there. Real Estate has a wide array of possibilities and opportunities.
Take Away
Buying a home for the first time does not need to be complicated. With the right guidance and help of a professional and experienced Real Estate Agent, you can never go wrong with the process. Just make sure you choose the right people to work with and make the right decisions.
Reference: www.rocketmortgage.com