on 1 year ago
Maybe your rent or lease is coming due and you are thinking of becoming a first time home buyer. Now is a great time to buy a home and own your very own home. Buying your first home is a very exciting time in your life. Depending on which state you live in, you might also be surprised to know that there are grants and incentives to help you with your down payment as well. I have recently seen first time home buyer grants and down payment assistant programs ranging from several thousand dollars up to $15,000. Having been a real estate agent in several states myself since 1998, I can tell you home ownership is something worth investing in. Especially long term, home ownership and building home equity is the way to go.
I have put together a list below of the top 10 first time home buyer tips as well as a couple mistakes to avoid. Keep in mind each market is local and very much different. So be sure to consult with a local agent for local market incentives and more guidelines. I have put together a Top Realtors Near Me map below. Be sure to contact them early in your homebuying process depending on where you plan to buy your first home.
Top 10 Tips for buying your first home
Tip #1 Assess your credit score and your savings.
Before you get started doing anything like looking at houses, the first thing we have to do is find out what your credit score is. You can go to any one of the major 3 credit reporting agencies like Equifax, Experian or TransUnion and then check your credit report.
You can actually do this once a year for free and you can get your credit score. Make sure that you will qualify for a loan. The amount of money that you have saved and your credit score is what's going to determine what type of loan that you can get. So this is very important to do first before we do anything.
Tip #2 Choose The Right Mortgage.
In any mortgage basics scenario the first step is to get with a lender. You need to find out what you can qualify for based on the amount of money that you have saved along with what your credit score is. This really determines what loan options are best for you. The first type of mortgage would be a manual underwriting mortgage. In this type of mortgage they don't actually check your credit at all. So you can have as low as a zero credit score and they will accept it. The problem is you do usually have to have 20% down or more and because these are high-risk loans they don't come with any kind of perks. Usually they come with higher interest rates. The second one would be a USDA loan. A lot of different USDA loan products out there exist but some of them can go for as low as zero down. USDA requires only a 580 credit score but be sure to get with a local lender or contact me to confirm today's rates. The drawback with a 580 credit score and zero down would be that they almost always are in rural properties. So if you wanted to live in a city or somewhere you know more urban these types of loans won't apply so just keep that in mind. The next type of loan would be a VA loan. Va loans come with zero down but they do require a little bit higher of a credit score. They usually require about a 640 credit score but again being drawback to this one would be that as a VA mortgage loan they do require you to be a veteran. There are many VA loans which require no down payment at all.
The next mortgage type is a FHA loan. FHA loans come with as low as 3.5% down with a 580 credit score. If you have a lower credit score you will have to put more money down. The main drawback to this two particular type of loan is that they require private mortgage insurance which is an extra charge. So it will make your monthly payment higher and that's for the life of the loan. The last one would be a conventional loan conventional loans start with as little with as little as 5% down. Honestly most of the people who qualify for conventional loans are what they call premium buyers. If you can qualify for a conventional loan this is great because there are some perks. You can get lower interest rates and the best assistance programs. You can get a lot of paid closing costs with this particular type of loan. The loan option which is a great fit for you may not be great for someone else.
Tip #3 Boost Credit and Savings.
Once you've checked your credit score and you've checked your savings and you don't qualify for the type of mortgage that you are hoping for you may have to fix these things. If you don't and you already qualify for those you know the loan that you're hoping to look for you can totally skip this step. If you need to save some more money my I think my first recommendation would be to just live as frugally as you can. Save as much money as you possibly can and obviously have a budget in place. Double check your checking accounts and make sure they look clean.
Tip #4 Shop for your mortgage lender.
I think this is probably one of the most overlooked steps of all of the process. Taking the time to shop for your mortgage lender can save you hundreds or thousands of dollars you know upfront when you go to buy your house and over time with your monthly mortgage payments. Definitely don't skip this step.
Tip #5 Organize your paperwork.
Get all of your recent pay stubs, get your bank statements together. Find your last two years of tax returns. Because when you go to apply for your loan the lender is going to ask for all of this information. So we might as well have it already so that we can deliver it to the lender when they need this information.
Tip #6 Make a list of your wants and needs for your home.
Make sure that you tell your real estate agent when you start working with one. Make sure that you're not going to waste your time looking at properties that aren't going to be a fit for you. Be somewhat flexible on the like to haves of course because there's no such thing as a perfect house.
Tip # 7 Start looking online at the different houses.
Keep in mind that you will eventually want to start working with a Realtor. It really is important to start looking online to kind of get a feel for what the houses look like in the area. Get familiar with what you can actually get with the amount that you're approved for. You will want to make sure that you're working with a Realtor.
I highly recommend having an advocate on your side working with you to help make sure that you're finding what you're really looking for and gonna help me make it to where you get the right deal. Don't be shy about going and meeting agents even before you're ready if you're thinking about buying in the future you may even want to start meeting with real estate agents now. Sometimes they won't want to give you you know the time to work with you. However some will. They can help give you some information some valuable information and provide you on more local tips and mistakes to avoid. This will help you so that you can better prepare yourself later when you are ready to go ahead and buy.
So your first showing of the houses that you're gonna be looking at is online so they usually have pictures you can go look through them and so this kind of does count as your first showing in a way. But do keep in mind that when you go to look at the properties sometimes they are different than the way that they look in the pictures. So sometimes the pictures can look beautiful and then you get there and you're like yeah or it could be the other way around. You may look at the house and think you know this one doesn't look all that great but in person it looks a whole lot better. So do keep in mind that while your first showing again is online don't discount different houses based on the pictures. Go ahead and you know keep the best open mind that you can to make sure that you're exposing yourself to all the different properties out there.
Make sure you consider resale value. The neighborhood, the style of the house, proximity to schools and shopping. All of these things are not only going to make a difference when you go to sell, but eventually you probably might selling it. and So you want to make sure that it's going to appeal to the other buyers at that time. It's also going to make a big difference in how happy you are in the house while you're living there. So definitely keep in mind these types of things and keeping these things in mind when you're shopping for your house. Even if you don't have any kids now you may want to consider what kinds of schools there are in the area so that when you do maybe start a family you don't have to move just to get into a better school district.
Tip #8 Consider all of the expenses that come with home ownership.
Do keep in mind that renting is entirely different than owning a home and so if you're going from renting to being a homeowner which is what most first-time home buyers do. You definitely need to keep in mind that the price if your rent is the same as your mortgage you might end up in trouble. A lot of the expenses that you maybe aren't covering right now in your rent you're going to have to come up with as a home buyer. A payment calculator can come in handy too. You can find these on a lot of sites as well.
Tip #9 Don't just look at the purchase price.
In home buying instead at focusing on the purchase price focus on what your monthly mortgage payment will be in total. Because the purchase price is something that you sort of look at when you're going to figure out which house you want to buy and use it shows up on a piece of paper when you sign for it on the day when you close. The thing that you're really going to live with however is the monthly payment. That's going to come up every single month until you either pay it off or you sell the house. The price range of your home should not be maxed out either.
So you definitely want to keep more in mind how much the house is going to cost in the monthly mortgage payment. Many times home buyers will look at how much the lender says that they are qualified for and then look down the page and then find out how much that payment would be and think oh my gosh. I don't think I can afford that much. Lender's in general will let you borrow up to 36% of your gross income. When it comes down to it after taxes, this could be as much as 45% what your take-home pay is.
It can be a big time home buyer trap to end up in a house that you really can't afford to live in especially when you consider that your it's now home ownership and so there's gonna be other expenses that are going to be coming up.
Try your best to make sure that you're comparing apples to apples and looking at what the monthly payment is going to be with your principal, interest, taxes and insurance. Which is what a mortgage payment is usually comprised of and called PITI in the mortgage industry. Private Mortgage insurance is the key here for insurance costs. Mortgage rates can vary from month to month. If you need a home loan and see a good rate too good to be true it might be a gimmick as well.
Tip# 10 Work with a good agent.
This is very very critical be sure you're choosing a good agent so that they can be an advocate for you so that they can make sure that they are guiding you in this whole process. Working with the right agent can help you sell for more when you go to sell later. They can help you buy your house for less too. A local experienced Realtor can make sure the whole real estate transaction is with the least amount of hassle and they will make sure the whole transaction will go as smoothly as possible. Also they will help you get your first home inspected properly.
First-time home buyers are a true value in our market today. The National Association of Realtors has just come out with a report showing that first-time home buyers make up over 34% of all home sales nationally.
Mistakes to avoid as a first time home buyer
#1 Not being fully approved by a lender.
Buying a home is one of the most important and biggest financial transactions that anyone will make in their lifetime so it's very important to understand the numbers going into the transaction. Getting pre-qualified and pre-approved are two different things. A good lender will be able to tell you how much house you can afford and what the impact is going to be on your budget monthly from that purchase. So it's very important to do that first talk to a lender know your numbers before you start looking at homes. Make sure you know what the closing cost is as well as the mortgage insurance. The mortgage process is a lot of paperwork. You will find many lenders triple check everything. So don't be surprised if they need another bank statement from you.
#2 Waiting too long to make an offer.
It's very anxiety-producing to make an offer on a home after all this looking and thinking about it. The fact is that the good houses actually go very quickly. So there's a point at which you need to take action and be decisive and put your offer in. So when you do see a house that you really like get in touch with your agent and go ahead and make that offer so you can actually get the home.
#3 Making too low an offer.
In this era of the Internet and the multiple listings, because of the exposure that houses are getting and how many buyers are out there looking at the house, most houses will actually sell for fair market value or very close to that. So if you make an offer that's way off their market value the seller probably is not even going to look at it and you may be wasting your time and fooling yourself about what you can really get. Fair market value is taking the actual price of a house and what it sold for and comparing that with what recently sold in the neighborhood that's a very very similar house.
#4 Relying Too Heavily on Internet Resources.
The internet is a very valuable source of information when home buying. About 95% of all home buyers will start the process by looking on the internet. Now as we all know there are internet providers such as Zillow that will give estimates of the value of a house. We also know in our marketplace that these values can be wrong by up to 15% sometimes on either side 15% too low 15% too high. So the value of using a good real estate agent is that that agent has actually been in the houses that are comparables for the house that you're considering buying. So We're looking at things like what side of the street is it on. What school district is it in?
#5 Home Inspections
Be sure you get the house inspected by a local licensed professional inspector. Don't get a relative or someone you know that thinks they know about home construction. This can cost you in the long run.
Home Buyer Faqs
Was the kitchen been updated? Are there any issues that add value to the house or subtract value to the house? A local experienced Realtor can not only help you with what the house is worth and making on offer on your first home. Working with a buyer's agent is free to you as a home buyer and when you find the agent that you like it will help you to get the house that you want to buy. Thanks for reading this article on first time home buyer tips and be sure to share this article.