Buying a house is a key part of the American dream. You get to finally have a place to call yours and start a family. However, achieving this dream requires following a complicated process.
Homebuyers, especially first-timers, need to know as much as they can about this process before making a decision. Not doing so can lead to regrets in the long run. Already, a study shows that more than four out of every ten homebuyers regret purchasing a house. You don’t want that buyer’s remorse to happen to yourself.
So, what should first-time homebuyers know or do before buying a home?
Follow us as we provide tips to help first-time homebuyers have a seamless and stress-free home buying process.
1. Pay your debts
Owning a home is not a one-time expense like buying clothes or shoes. As a first-time homebuyer, you need to understand that this expense will take up a considerable part of their monthly budget. That is, after making mortgage and utility bill payments, you may not have enough to spare.
Therefore, it will be wise to start by first paying off your debts before buying a house. That way, you won’t struggle to service multiple debts after purchasing the house. Paying down your debts (especially credit cards) will also improve your credit score, which can help you get a better interest rate on your home loan.
2. Save to buy the home
Many expenses come with buying a house. Down payment, moving costs, and closing costs are just some of these expenses.
Down payment can take up as much as 20% of the loan, while closing costs take between 2% to 5%. (There are programs available to help reduce your down payment, such as FHA loans (Link to What are the different types of mortgage loans for buying a house?) but not everyone qualifies for them.)
You should save up for these expenses to make the home buying process easier for you.
Saving for your home will also come in handy when you have to pay for unexpected costs like faulty appliances. According to a study, 18% of homeowners consider these unexpected costs their major regret after buying a house.
3. Improve your credit score
A low credit score reduces your chances of getting favorable mortgage loans. It also leads to an increased interest rate as most lenders will consider you a credit risk. Therefore, you should work on improving your credit score before buying a house.
Some of the ways to improve your credit score are:
- Pay your bills promptly.
- Keep your credit card balances low.
- Track your credit score. Doing this will allow you to quickly notice and report any errors that may affect your credit score.
- Work with a competent mortgage loan officer who can provide a personalized assessment of what changes you can make to improve your credit score the most.
4. Target only houses you can afford
When buying a house, work with your budget. Consider your income, savings, and future expenses before choosing the price range of your desired home. Don’t try to purchase a home beyond your financial capability.
Many homebuyers target houses above their budget with plans of getting a higher loan or a loan to cover the down payment (called a “gap loan”) to finance the purchase. This oversight usually leaves them disappointed as the lender may reject their loan application. Or worse, they lose the home to foreclosure after a while because they can’t keep up with the payment after circumstances change.
5. Get a buyer’s agent
Many first-time homebuyers believe that they can handle the buying process by themselves. But buying a house by oneself is complicated, stressful, and time-consuming.
For instance, a person looking to buy a home without an agent’s help must be willing to go through this 6-page real estate contract on their own and understand it when preparing to submit an offer. May we add that this contract is filled with jargon you may not be familiar with.
Having a buyer’s agent can help you solve this and other problems.
For starters, they will help you look for houses that meet your needs and schedule a showing in advance. If you like a place, the agent will help you negotiate a good deal. The agent also knows the questions to ask and the changes to make to give your offer the best chance of being accepted.
They will also help you in other ways, like connecting you with trustworthy mortgage lenders or home inspection companies. The best part is that you are not paying for their service – the seller is obligated to pay the buyer’s agent.
We’d advise that you go for Bost Redevelopment when looking for a reputable buyer’s agent. Our team of expert realtors is well-equipped and connected. They will get you your dream house.
6. Research the neighborhood of your choice
As a first-time homebuyer, getting insights into what it feels like to live in your desired neighborhood matters a lot. According to the National Association of Realtors, 58% of homebuyers consider the neighborhood quality before buying a house.
Ask yourself important questions like: Is the place far from your work? Are there quality schools around for your kids? These questions will help you make better decisions.
For example, if it is far from your workplace, you can simply change your mind and target other neighborhoods. (Link to the article: How to choose the right location when buying a house) Some realtors have tools that allow them to quickly find properties within a certain driving distance from your workplace.
7. Choose the best mortgage option
There are several mortgages first-time homebuyers can choose from. There is the conventional loan, the USDA loan, and the VA loan. You can apply for any one of them provided that you meet the stipulated condition.
However, before choosing any one of these options, talk to your agent. They will explain the different mortgage rates and lenders’ fees to know which best suits you.
After deciding on the mortgage of your choice, be sure to get a mortgage pre-approval letter. Taking this step will let the homeowner see you as a serious buyer. This automatically increases your chances of securing any home you choose.
We Can Help You!
Having an agent like Bost Redevelopment in your corner as a first-time homebuyer automatically increases your chances of getting the house of your dream.
Our expert team of real estate agents will provide all the support you need throughout the house buying process. We will use our network and connection to help you find the house of your dream. Lastly, we will negotiate with the seller to make sure you get a favorable deal.
Want to talk more about your options? Please leave us a message below with your contact information and let us know how we can help you.