The average homeowner has a net worth over 40 times greater than that of a…
The decision to transition from renter to homeowner is an important milestone in life–one that can be both thrilling and overwhelming. As you begin the process of shopping for your dream home, you’re probably wondering what exactly you need to know before you jump in.
When it comes to buying your first home, there’s a lot to consider. Home ownership is a big commitment and an even bigger investment. Going into this process, preparation is vital. To help ease some of your anxieties, here are first time home buyer tips for even the most inexperienced house hunter.
First Time Home Buyers: An Easy 101 Guide
1. Make sure you’re really ready to buy
What you think you can afford and what you can actually afford might be two very different things. Unless you’re paying cash for your home, your house buying budget will be determined by what mortgage lenders determine you’re qualified to borrow.
Using a few rules based on a percentage of your monthly income, you can get a rough estimate of what that number will look like. If the homes you’re interested in are completely outside that price range, it might not be the time to buy your first house.
You can qualify for a mortgage with bad credit, but doing so usually results in higher interest rates, which will cost you more on your monthly payments and over the lifetime of the loan. Although lender qualifications vary slightly, a score below 600 is usually considered low and thus, a potential risk. If you need to improve your credit, it might be best to do so before you start looking for your new home. Several ways you can improve your credit are:
- Pay off all of your outstanding debts
- Pay the full balance on your credit card every month
- Keep credit card balances low (below 10% of the full amount available)
- Do not close any unused credit cards
2. Do your research
Mortgages aren’t a one size fits all. There are different mortgage types, as well as varying rates and fees. Most buyers will want to look at fixed-rate mortgages with longer terms. Still, it’s always a good idea to do some research and learn the basics about how mortgage rates work and the different types that are out there.
3. Determine how you will pay for your home
If you’ve already determined you’ll need to take out a mortgage to pay for your home, you have probably also thought about your down payment
There are substantial benefits that come with putting money down when you buy your first home. If you haven’t already been saving up for this, it doesn’t necessarily mean you’re out of luck. There are ways to start saving now to get yourself where you need to be. With some minor adjustments to your budget and lifestyle, you can get to where you need to be in under a year.
You should also make sure that you can afford the mortgage payments each month and still live comfortably. Just because you qualify for a certain home doesn’t necessarily mean it’s a great financial decision.
4. Start your search
If you have all of the steps covered above, you’re ready to start your search. Check out homes in the area you’ve got your eye on and make sure they fit in with your lifestyle and budget. You’ll want to create a house hunting checklist with all of the important things you hope to get out of your first home. Bring that list to your realtor when you’re ready–as well as to each home you visit. This will help you keep the big picture in perspective.
Finally, check out the realtors in your area. Find one who is willing to be patient and attentive as they guide you along your journey as a first time home buyer. At Dream Homes by Jen, we have helped a ton of first time home buyers successfully navigate the sometimes complicated process of buying a new home. Contact us today and let’s start looking for the home of your dreams!