Five Tips for First Time Homebuyers
Buying your first home can be exciting, but it can also be a very overwhelming process. Budgets, financing options and location are just some of the few significant details that have to be considered, but there can also be so much more.
If you are looking to purchase your first home, see below for some great ideas of how to get your ducks in a row, and what to look for when considering a large purchase like real estate.
Check your credit. Most agencies allow a free comprehensive credit report once a year, and it’s a great idea to make this the first checkpoint on your list. You may discover unresolved issues that may be fixable, or find that your score is not up to what you thought it was. The good news is that if you aren’t where you want to be credit-wise, there are other options for financing besides a traditional mortgage lender. Hard money lenders, also known as direct lenders, can offer to finance with a short-term loan based on factors about your potential property, not the borrower.
Know your upfront costs. Many people know that there will be a down payment required, which can be as much as 20% of the purchase price or as little as 3.5% with something like an FHA loan. However, there are more costs that homeowners may not be prepared for, such as closing costs or inspection costs. These out-of-pocket costs can be thousands of dollars up front, so be sure to budget that in when looking into your savings and assets.
Know the difference between prequalification and preapproval. A prequalification is when a lender takes a look at your assets and debts and will give you an estimate as to what amount of a loan that particular institution would be willing to give you. This is a great tool when deciding what your budget range will be when looking for a home. When you start to narrow your list down, a preapproval letter will let the agent and sellers know that you are a serious buyer, as it is more of an in-depth look at your finances with a written promise from the lender that they will loan you up to that amount. It’s always smart to get both, but be sure to know which one you have on hand when putting in an offer.
Consider your future needs. Many people look at first homes as “starter homes,” that will fit their budget, space needs and location needs for the moment. However, if you are considering something like starting a family, you may want to consider what that will mean for your need of space, bedrooms, neighborhood or school districts. Consider that you may have budget changes shortly, or want to stay longer than your family size would allow.
Look past the small things. Paint colors, furniture and landscaping, are relatively easy economical changes to make once a home is yours. Focus on the more important aspects such as when the roof was last replaced, repairs needed or the age of appliances or heating and air units.