If you go to sleep at night dreaming about owning your first home, it’s time to get to work! With a little preparation, you can be on your way to becoming a homeowner. Here are some tips to help make the home buying process a little easier:
- Educate yourself about owning a home. See if there are any first-time home buyer seminars or education workshops available in your area. These classes typically cover topics such as credit scores, down payments, costs involved with owning a home, home inspections, mortgages, and more. Attending one of these courses can be a great way to empower first-time buyers and set them up for success.
- Before house hunting, know what you can afford. There are numerous online calculators you can use to help determine a good price range.
- Plan for closing costs and moving-in expenses. Closing costs typically range between 2% and 5% of your loan amount. These costs can include things like loan origination fees, appraisal fees, title searches and home inspections. And don’t forget to factor in additional expenses like moving costs, furniture, and necessary repairs or upgrades. Budgeting for these expenses will help you to more accurately determine how much home you can afford.
- Scope out the community where you might be living. Be sure to look into things such as local property tax rates, school ratings, recreational opportunities, and crime rates. Evaluating the community before you buy will help to ensure it’s the right fit for you down the road.
- Get a jump start saving for your down payment. Although there are low- and no-down payment loan options available for first-time home buyers, keep in mind that they could result in higher monthly mortgage payments and/or a requirement to pay private mortgage insurance (also known as PMI). The more you can save up toward a down payment, the more flexibility you’ll have with your mortgage choices once you’re ready to buy.
- Know your loan choices as a first-time homebuyer. There are many mortgages available to first-time buyers, some with low- or no-down payment requirements. Depending on your unique situation, these could include FHA loans, USDA loans, VA loans, or conventional mortgage loans.
- Check your credit. Before applying for a mortgage, order free copies of your credit reports and review the information to ensure it’s accurate. Your credit rating plays a major role in the mortgage process. So be sure your credit reports don’t contain erroneous information that could have a negative impact on your credit score. Errors in your credit report could result in a higher interest rate, or even a denial of your mortgage application. If you do find errors in your report, you have the right to dispute them with the credit reporting agencies. And, if you don’t find errors, but find that your credit score is too low to qualify for a mortgage, don’t panic. There are plenty of things you can do to help raise your credit score.
- Get pre-qualified if possible. When you “pre-qualify”, or are “pre-approved” for a mortgage, the lender typically provides you with a documented estimate of the amount they’ll let you borrow, based on your finances and credit. This gives you a solid idea of the price range of homes you can feasibly buy. Also, a pre-qualification or pre-approval letter shows the seller that you’re serious about buying the home, and that you are likely to be approved for the mortgage, which can potentially give you an advantage over less-prepared buyers.
- Be prepared to negotiate. If there’s little competition with other buyers for the home, you may be able to get the seller to lower their asking price. You may also be able to ask the seller to cover closing costs, make certain repairs, or include things like appliances or furniture in the sale. Keep in mind though, that if there are many interested buyers, you may have to make some concessions in order to make the sale happen. Depending on the seller’s needs, you may need to be flexible with things such as price, the length of time to close, or the time frame for inspections.