Home Business 6 Important Tips for First-Time Home Buyers

6 Important Tips for First-Time Home Buyers

15 min read
0
0
22
6 Important Tips for First-Time Home Buyers

After years of working and saving, you’re finally ready to make your dream of owning a home a reality.

However, since this is likely the biggest investment of your life, you want to make the smartest possible decision.

You need to know you can afford your monthly payments, understand how the down payment process works, and make sure that you find an agent that will help you to navigate the buying process.

Read on to learn more about the top tips for first-time home buyers.

1. Be Realistic About What You Can Afford

More than 50% of American homeowners cannot currently afford to make their mortgage payments every month.

You don’t want to risk losing your home and destroying your credit score because you bought a house that you can’t truly afford.

Now is the time to check your credit score, determine your debt to income ratio, and be brutally honest with yourself about how much you can actually afford to pay each month.

Don’t forget to add in the interest rate, any late payment penalties, and have at least six months of mortgage payments in your savings account in case of a sudden emergency.

2. Save for Your Down Payment ASAP

One of the most important first-time home buyer tips?

It’s never too early to start saving for your down payment.

Now is the time to tighten your budget, and only look at homes whose total cost you can afford to pay about 20% of (the normal down payment amount.)

Yes, many first-time home buyers can often apply for lower down payment percentages well under 20%. However, if you opt for a lower down payment, be aware that you’ll need to pay for mortgage insurance and be able to make both higher interest rates and a higher monthly mortgage payment if you go this route.

If at all possible, aim to make the 20% down payment to make your life easier down the line.

Must Read:  Why 2019 Brings Hope To Home Buyers

3. Consider Your Loan Options

The good news is that, especially when you’re buying your first home, you have lots of different loan and even state assistance options other than a traditional mortgage to help finance your purchase.

You can apply for FHA loans, which are ideal for those with less-than-perfect credit scores and who can’t afford to make their down payments. For this, you’ll need to have a minimum credit score of 580 and be able to make two mortgage insurance premium payments.

If approved for an FHA loan, you could get a down payment of only 3.5%.

If you want to buy a home in a rural area, look into USDA loans, which has strict income limitation requirements but may not require you to make a down payment at all.

If you’ve served in the army in the past or are currently an active-duty member of the United States military, you and your family members may qualify for a VA loan.

If you want to buy a home outside of the U.S., find out more about potential grants and funding options in the specific country.

Again, just be aware that the overall cost of your mortgage will be higher if you opt for these loans, but it also means you’ll be able to get your home sooner.

4. Fixed-Rate vs. Adjustable-Rate Mortgages

Next, you’ll need to think about whether a fixed-rate or adjustable-rate mortgage is the best choice for you.

A fixed-rate mortgage means that you’ll make the same principal and interest payments every month for the entire life of the mortgage. This means that you’ll have an accurate sense of your budget every month.

However, you may pay more interest with longer-term loans, and you will need to wait longer to build up equity.

If you want to pay a fluctuating interest rate each month that change based on market conditions, go for an adjustable-rate mortgage. Especially at the start, you may have a fixed interest rate on ARMS for a few years.

This helps you to save on interest payments, but means payments are unpredictable and could become unaffordable.

Must Read:  How Disability Mortgage Loans Help to Protect the Home?

5. Work With a Real Estate Agent

Perhaps the most important entry on our list of the best tips for first-time home buyers is to work with a real estate professional.

They’ll be able to help you take advantage of as many open houses as is possible, they’ll know about future listings before they hit the market, and they’ll work to make sure you get as close to what you want within your budget as is possible.

Plus, they’ll also help you when it comes time to negotiate — which will remove tons of stress from the process.

6. Don’t Forget About Closing Costs

One of the most common mistakes that first-time home buyers often make is completely forgetting about closing costs on their new home.

Standard closing costs are about 2-5% of the amount of your loan.

In some cases, you may be able to bargain with the person selling you the home to cover at least part of your closing costs, and you should always take the cost of closing costs into account when deciding on your offer.

You can also use this calculator to help you get a strong estimate of your potential closing costs.

Follow These Tips for First-Time Home Buyers

If you follow these tips for first-time home buyers, then we feel confident that you’ll be able to get the home of your dreams for the best possible price.

Remember to study up on market conditions, be brutally honest with yourself about the mortgage payments you can afford, and to work with a real estate professional who knows how to make the process easier.

Looking for advice on how to reduce your current monthly expenses as you prepare to save for a down payment? Interested in getting a second part-time or work-from-home job to make buying a home easier?

Keep checking back with our blog to make sure you have the best tips and tricks about how to pad your income, save more money, and make smart financial decisions now and in the future.

Facebook Comments

Load More Related Articles
Load More By admin
Load More In Business

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Check Also

The Top 10 Office Colors for Increased Productivity

The average employee is interrupted 56 times during a workday. Simple changes to your offi…