Purchasing your first home is the biggest investment you’ll probably ever make. It’s a major life milestone and one that requires plenty of due diligence before you settle on a mortgage and your ideal property.
If there was any type of decision you should never rush into, it’s buying a home. Don’t feel pressured into making a decision because of the perception that you ”need to” own a home by a certain age. At the very least, the timing and your finances should be in order — no matter how old you are.
Looking for expert tips on how to buy a home? Check out the rest of this blog as a guide.
1. How To Buy a Home: Start Saving Early On
Making a home purchase takes a significant amount of money. Thanks to Hollywood and the media, home buying has been somewhat romanticized, but the reality is that it’s not always a walk in the park and can take many years to prepare for.
Before putting an offer on a house, you need to keep in mind that there are considerable costs involved:
- The down payment — this is usually quite a hefty sum of money depending on the type of mortgage you qualify for, even if you have excellent credit and only have to pay 3 percent down
- Home closing costs — this includes the fees and expenses it takes to finalize your mortgage which ranges from 2-5 percent of your loan amount
- Move-in costs — you’ll need to spend money on moving services, possible home repair or renovation jobs, upgrades, new furnishings, etc
When it comes to your home down payment bear in mind that most lenders are relatively lenient with first-time home buyers. This means that if you have a decent credit score, you won’t need to pay more than 3 percent of your loan amount as a down payment.
However, if you do the math, 3 percent on a first-time home that’s $500,000 still works out to be a large sum of money — $15,000 to be exact. So start planning and saving early on in order to meet your down payment goals.
2. Be Realistic About What You Can Afford
Once you have built up a decent-sized nest egg of savings, you need to take a long, hard look at your current earnings and overheads and then decide what you can realistically afford to pay on a mortgage each month.
This figure needs to be a safe amount, i.e. a sum of money that will not jeopardize your current state of living. Once you have decided on this figure, you can narrow down your home and neighborhood search to suit your budget.
3. Consider Your Credit Score and How To Strengthen It
What is the big deal about your credit score, anyway? Well, it determines the type of home loan a lender is willing to offer you. It also determines whether you can qualify for a mortgage at all, and also impacts the interest rate of your loan.
So, it’s kind of a big deal.
Before you shop around for a home, do some research on your credit score. You can get a free copy of your credit report from credit bureaus such as TransUnion, Experian, and Equifax. If your credit score is not where you want it to be, there are a few things you can do to improve it.
First of all, make sure you are diligent with how you pay your bills and always meet your credit card repayments. Keep your credit cards open and running, just make sure you manage them well. If you have any other loans you’re paying off, always meet your repayments on time.
4. Look for the Best Mortgage Option To Suit You
In today’s day and age, there is a myriad of mortgage options available to suit all types of budgets and credit ratings. Most of these mortgages vary based on eligibility and down payment requirements.
Some of the most common mortgage loans you might want to consider as a first-time home buyer include:
A conventional mortgage –– offered by mainstream, conventional lenders, while some may offer a 3-5 percent down for first-time homebuyers
FHA home loan — your mortgage is insured by the Federal Housing Administration, with down payments as low as 3.5 percent
USDA home loans — this is a loan guaranteed by the U.S. Department of Agriculture, they are ideal for rural homebuyers and don’t require a down payment
VA home loans — these types of home loans are catered to U.S. veterans and are supported by the Department of Veterans Affairs, they also require no down payment
Another important factor you want to consider when choosing a mortgage is the loan term. While it’s most common to opt for a fixed, 30-year term mortgage, you can also opt for a 15-year term with a lower interest rate. However, a 30-year term interest rate stays the same over this time.
5. Work With an Estate Agent You Know and Trust
We get it, you might not know any estate agents that are trustworthy if you’re completely new to the market. This is where referrals are useful as well as your own research.
You want to work with a good real estate agent that has a steady reputation. Ask friends and family members for their recommendations. A reliable agent will scour the market for you and make sure to find a home that meets your needs and suits your budget.
They will also guide you through negotiation on price, the closing process, and so much more. A trustworthy estate agent can make or break your home buying process, so choose your agent well!
6. Choose a Home and Neighborhood That Suits You
Buying a home is kind of like getting a tattoo on your face. In other words, it’s a huge commitment so you should always choose a place that really fits in with your needs and wants out of life. Do your due diligence when it comes to neighborhoods, the type of home you need, and the local amenities that suit your lifestyle.
If you’re looking at buying a condo, townhome, or property in a gated community, don’t forget about homeowner’s association fees.
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So, how to buy a home the right way? Start saving early on, plan out your budget, and do your due diligence based on mortgages, homes, neighborhoods, and estate agents, too!
If property is your passion and you want to learn more about buying, selling, or what’s hot on the market right now, be sure to explore the rest of this site for more.
