First-time homebuyers can easily grow overwhelmed by the time and money it takes to acquire a home. However, there are plenty of resources available to make the process efficient and to calm a buyer’s nerves. Those looking to purchase their first home will need to assess their current financial situation and determine what they’re looking for in their new home. They can also consider the following tips to streamline the process:
1. Consider the Future
When buying your first home, consider your anticipated needs in the next two to five years and beyond. If you plan to start a family soon, you may want to target neighborhoods suitable for kids or perhaps areas with highly-rated schools. You may also want to consider a home with a basement that you can finish if you think you might have a future need for additional living space.
Purchasing a home is an expensive and time-consuming process. First-time homebuyers may consider purchasing a starter home that they will sell in a few years, but buying a home that they can grow into and adapt may be a more cost-efficient option for current prospective
2. Establish Your Criteria for a House
Once you’ve narrowed your search to select neighborhoods, look at the homes available for sale. Run an online search in your chosen neighborhoods to get a sense of properties in your price range. To avoid wasting time touring houses that don’t meet your needs, try to rank the importance of major home features. How many bedrooms do you need? Would you prefer an updated kitchen or hardwood flooring? If you prefer certain architectural styles, such as a Mediterranean home, communicate this with your real estate agent to help narrow their search.
3. Evaluate your Financial Situation and Take Action if Necessary
Starting the buying process in a strong financial position can lead to your ultimate success. In competitive real estate markets, sellers look for the strongest bidder based on their financial ability to complete the purchase. Good credit can also help first-time buyers obtain lower interest rates and better terms from mortgage lenders.
Before you start home shopping, check your credit score, clear out old debt, and dispute any errors in your credit report. You should also calculate your current debt-to-income ratio (DTI), including any current student loans, auto loans, or credit card loans. Most lenders look for borrowers with outstanding debt, including their mortgage payment that does not exceed 36% of household income.
4. Learn About First-Time Homebuyer Programs
First-time buyers unfamiliar with mortgage loans may want to attend a first-time homebuyer workshop to gather information about the application and approval process. The workshops can help you determine which mortgage programs might work for you and how you can save on closing costs or secure additional funds for rebuilding and renovating your home.
Additionally, mortgage lenders and communities may offer assistance through first-time homebuyer programs. Programs provide various benefits for homebuyers, including reduced down payments, lower closing costs, and lower interest rates. Each program has its own set of qualifications and requirements, so participants will need to research the available programs in their area to find the best fit.
First-time buyers who cannot meet the typical 20% down payment requirement may also want to look for a lender that offers government-sponsored FHA loans.
Before you buy, you may want to ask your tax preparer about the tax benefits of home ownership and find out if you qualify for a tax credit as a first-time buyer. Check with your state or local government for programs offering mortgage credit certificates, which allow lower-income buyers to receive an additional tax credit based on the amount paid for mortgage interest.
5. Budget for Ongoing Expenses
First-time homebuyers know they need to save for a down payment and estimate their monthly mortgage payment and property taxes. However, prospective buyers should also build up funds to cover the ongoing costs of homeownership. Home maintenance tasks can become costly, and an unexpected repair could lead some owners to experience buyer’s remorse.
Some areas may have their own costs that buyers should budget for. For example, New York City condo and co-op fees cover the costs of maintaining a property but can significantly impact a buyer’s monthly budget.
6. Understand the Maintenance Requirements of the Property
In addition to simply keeping a house clean, homeowners must learn about repairs and renovations. Some common exterior home maintenance tasks could include:
- Cleaning the gutters,
- Sealing cracks and gaps in windows and doors,
- Draining and winterizing exterior plumbing,
- Pressure washing the outside walls of the home,
- Landscaping, such as mowing the lawn, raking leaves, and removing weeds.
You can opt to hire professionals to complete some home maintenance, but don’t forget to budget for these costs. Or, you can consider buying a condo or co-op, where monthly maintenance fees cover items like heat, pest control, plumbing, trash, and snow removal. No matter which route you choose, try to estimate and plan for the maintenance expenses associated with your new home.
7. Work with an Experienced Real Estate Agent
While you can gain important knowledge about the real estate market by reading information and looking at for-sale listings on the internet, first-time buyers may still benefit from working with a real estate agent. An experienced and educated agent can give you an insider’s view of the local market and recent market trends. In addition, keep in mind that every transaction in real estate involves negotiation. Having an experienced agent by your side can make this part of the process much smoother, with a more successful outcome.
Agents typically charge a commission based on a percentage of the sales price, paid by the seller at closing. Since buyers do not always pay the commission, they may overlook the significance of this cost. However, sellers may weigh the commission when deciding to accept an offer.
8. Get Pre-Approved
Before searching for homes online, take the time to research the types of mortgages and current interest rates. Use a mortgage calculator to determine how much you can afford to pay for a home. You don’t have to wait for an accepted offer to start the mortgage process.
For many first-time buyers, it helps to sit down with a lender ahead of time and request a mortgage pre-approval letter. A pre-approval letter helps you understand your budget and proves to a real estate agent that you are serious about your search. Pre-approvals carry more weight than pre-qualification, so buyers should acquire pre-approval if they are ready to tour and submit an offer.
9. Keep Your Cool
Purchasing your new home is a personal matter that will evoke strong emotions throughout the process. Investing your time and money into a sometimes frustrating purchase may cause you to make decisions you would not make in a different situation. Buyers should regularly check in with themselves to ensure they are making the right choice for their budget and wishlist.
For example, you may fall in love with a property outside your budget. If you decide to move forward with an offer, carefully consider the financial implications this will have. Paying more each month to satisfy the mortgage payments may interfere with your ability to save money for other purchases, like a college education for a child or a dream vacation. Additionally, growing concerned about other offers in a competitive market may entice you to waive contingencies, like a home inspection, that you may regret in the future.
Purchasing a home will take several months and will likely require several tours. View various homes, even if you fall in love with the first one you see, to ensure you understand what is currently available at your price point.
Remain level-headed throughout the buying process by taking time to socialize with friends, keep your routine with your favorite hobbies, and take time for yourself. Buying a home will take up a fair amount of your free time, so finding ways to unwind and prioritize your well-being will ensure you make the best decision.
10. Do Your Own Research Before Submitting an Offer
Sellers will strive to paint a wonderful picture of their home and neighborhood to achieve their goal of selling their house. Buyers want to find a home that’s priced fairly and meets their needs. Before you submit an offer on a home, take some time to conduct your own research. Look up property records online and find out the home’s age to anticipate potential reparis. Driving or walking around the neighborhood may give you a good sense of the area and learn if the neighborhood operates through a Homeowners Association (HOA).
Conclusion
Purchasing a home is a major decision that may intimidate first-time homebuyers. Communicate with your real estate agent and mortgage lender to answer your questions and gain insight into your budget and the current market. Buyers can attend financial workshops and research first-time homebuyer programs to learn about the anticipated costs of homeownership and prepare to afford their purchase.
