Buying a home for the first time can feel like information overload. You might find yourself asking “Is my credit score high enough?” or “How do I know which type of loan I qualify for?” Luckily, having the right agent will help everything run smoothly. We’ve broken down the process from start to finish, and included a few tips along the way.
Before you start searching…
Saving, Credit, & Mortgage
Saving well in advance for your down payment and closing costs is rule #1. It’s always better to over-save, so unexpected fees or bidding wars won’t become a dealbreaker. Your down payment requirement will depend on the type of mortgage you choose (or qualify for) and the lender. Some conventional loans allow as little as 3% down, but even a small down payment can be challenging to save. Use a down payment calculator to set a goal and stick to it! Keep in mind, there are fees and closing costs involved as well. These typically range from 2% to 5% of the loan amount. Lastly, you will need to have cash reserves for necessary repairs- the joys of being a homeowner!
It is a good idea to get pre-qualified before your home search, so you don’t waste time on homes out of your price range. Getting a pre-approval letter from your lender will show agents that you’re a serious buyer and may give you priority over other home shoppers who haven’t completed this process yet. Lenders will pull Your credit and calculate your DTI. These will determine your mortgage eligibility. Check your credit score frequently, pay all bills on time, minimize debt, and keep all credit accounts open.
Explore mortgage options. The four main Mortgages are Conventional loans, FHA loans, USDA loans, and VA loans. The type of mortgage you qualify for will vary depending on down payment and eligibility requirements. You’ll also have options for your mortgage term, such as a 15-year or 30-year term.
Research which mortgage may be the best for you, in addition to first-time buyer assistance programs. Many states, counties, and cities offer first-time home buyer programs, which often combine low-interest-rate mortgages with down payment and closing cost assistance. Tax credits are also available through some first-time home buyer programs.
The Neighborhood Advantage grant is currently paying up to $17,500 to a new owner occupant buyer: $10,000 towards their down payment, $7,500 towards closing costs and waives mortgage insurance with either 3% down to $510,000 or 5% down to $765,000! For more information on this, click here.
So, you’re ready to start looking for your first home! This process can be both exciting and stressful. The more prepared you are, the better!
Agents, Homes, & Budget
A great agent will understand the current market, excel in negotiations, and take the time to understand your needs in buying your first home. When speaking with potential agents, ask them about their experience helping first-time buyers and how they are dedicated to helping you find your perfect home. Keep in mind that a home purchase is a long-term investment, and lifestyle changes happen. Search for a home in areas you can see yourself growing into for years to come. Stick to your budget. It’s easy to fall in love with every home you see, and lenders can tend to offer more than what’s comfortable for your budget. To avoid financial, stress down the road, stay reasonable and within your means.
*pro tip: Consider properties below your price limit to allow some wiggle room in a bidding war if the market is competitive.
Once you’ve found “the one”…
Inspections, Negotiations, & Insurance
A home inspection is a thorough assessment of the home to look for potential problems. This helps you make an informed decision about the home you’re about to buy. Keep in mind, you may need additional inspections apart from a Standard Inspection to look for things such as mold or pests. It is a good idea to attend the inspection, so you have a great understanding of the home and ask questions. You may be able to negotiate costs with the seller to either cover the cost of the repairs or lower the home price to allow you to deal with the repairs. Your negotiation power will depend on the current market and whether there is a high demand for the home.
Lastly, the lender will require you to purchase Homeowners Insurance. This will cover the cost to repair or replace damages to your home in the event of an incident (covered by the policy). Make sure you shop for additional insurance such as Earthquake or Fire Insurance if your new home is geographically affected by Natural Disasters.