First-Time Homebuyer? 6 Tips That’ll Help You Make Wise Decisions
Purchasing a house is probably the biggest purchase in your life, and this process for first-time homebuyers might be an overwhelming and stressful experience. It makes sense to take your time and to start planning early in order to avoid mistakes.
Below there is a list with several tips that will put you on the right track to having a right and successful purchase.
Start saving money for a downpayment as early as possible
Considering the high prices of most of the houses today, it might take you some time to save up money for a downpayment. Of course, you do not always need a big downpayment, and there are some mortgage programs that will let you pay only 3-5%. However, it is important to keep in mind that the more your downpayment is, the better your financial situation in the future will be. For example, in order to eliminate private mortgage insurance, you will have to have a downpayment of 20%. Moreover, the more you money your have for a downpayment, the more attractive you as a buyer for real estate agents and sellers. This means that you will have better chances to find a house of your dream.
Do research on mortgage programs that are available to you
There are a lot of mortgage programs helping homebuyers to become happy homeowners. Most likely you will be eligible at least for one of them. There are standard mortgage programs for homebuyers with a decent credit score, as well as the programs for certain population groups, such as veterans, or programs for homebuyers in rural areas.
These programs help homebuyers to buy their first home by offering lower downpayment options, better favourable interest rates, and more. The best thing to do is to start your online research as soon as possible to collect all the information you need about each program you may apply for. Choosing the right mortgage program is very important because it has a significant impact on the homebuying process.
Decide on how much you really can and want to spend
In other words, dream small. This means that even if you are approved for big mortgages, you should think twice. Just because a bank is willing to give you money does not always mean you can really afford it. You should think about it now and analyze your financial situation before it is too late. It is recommended to follow the rule of 28, which says that your monthly mortgage payment should not be more than 28% of your monthly income. Do not forget to add other expenses to factor in this calculation, including a car loan, a student loan, private mortgage insurance, and property tax.
Check your credit score
Your credit score has an impact on your interest rate and financing option when purchasing a home. The interest rate you receive will affect you financially for many years in the future. If your credit score is not high enough, you should take some time and work on its improvement before getting a loan. It might take months or sometimes years, but it is worth doing. In most cases, in order to improve your credit score, you need to have a steady job for the last 2 years and pay your bills on time. Yes, there are mortgage programs that will accept homebuyers with a low credit score, but it is not a smart thing to do. The lower your credit score is, the higher the interest rate you will pay, which basically means losing money.
Find a reliable mortgage broker
One of the most essential tips for first-time homebuyers is to find trustworthy and reliable people to work with. To work with a lender who you can trust when buying a home is critical. You need someone who is professional and experienced and is able to provide you with good financial counseling. If you found a lender, do not hesitate to ask lots of mortgage-related questions, including the questions about the documents, downpayment options, house insurance, specialized programs available for homebuyers in the area, origination fee that a lender might charge, an interest rate, and etc.
Hire a professional home inspector
The mission of a home inspector is to be your second set of eyes and to notice the problems you might not see. Quite often home inspectors find issues that give homebuyers a pause on purchasing the property. You will need someone who is reliable, experienced, and detail-oriented. The best strategy to determine how good and helpful a home inspector will be is to ask for a sample copy of the inspection report the inspector has done before on property like the one you are thinking of buying. The sample report will help you to understand how much work the home inspector is going to do.