Buying a home for the first time can be a great experience. You get a chance to find a home to make your very own and have some fun with it at the same time. But it is a big purchase and you need to be prepared for all of the work that goes into purchasing your first home.
As a first-time home buyer, you may feel overwhelmed by all of the things that you need to get done in order to get into that first home. Some of the tips that first time home buyers can utilize to make this process easier include:
Decide How Much You Can Afford
Talking to a bank will help with this one. They can give you a rough estimate of the amount that you are able to afford and whether a certain home price makes the most sense for you. Just because a mortgage lender is willing to give you a certain amount doesn’t mean that you should take out as much as possible.
Homeowners will be stuck with that mortgage for the next 30 years unless they move or refinance, both of which can take a lot of work. Pick a house price that fits with your financial goals and will be affordable for your needs as well.
Check and Strengthen Your Credit
The higher your credit score, the better deal you can get for your mortgage. The credit score will affect the interest rates and whether you even qualify for the mortgage. There are a few steps that you can take to help improve your credit score and make it easier to purchase a home. These include:
- Get copies of all your credit reports from the three main bureaus. You should dispute anything that is not accurate on them.
- Pay all of your bills on time and keep the credit card balances as low as possible.
- Keep your current cards open. Closing your cards can increase the portion of available credit you use, which will lower your score.
Your goal is to get the credit score as high as possible to get better rates on your loans.
Low or No Down Payment Mortgage
There are a ton of great mortgage programs that you can choose to help you when purchasing your first home. Gone are the days when you must have a 20% down payment to even get the mortgage company to look at you. It is not possible to put down a much smaller down payment and get into your home.
These mortgages will have more steps in them compared to the traditional mortgage because it does carry more risk to the bank. But thanks to the government backing the loans, first-time home buyers are able to get in for as low as 0% down and some mortgages will roll the closing costs into the loan amount as well, making home ownership more affordable.
USDA and FHA are good options to choose when you are looking for a no down payment loan. You will need to lookup whether you qualify for these loans. There are also options for low-down payments. The conventional 5% is a popular option that allows you only to put 5% down and get many of the benefits of a conventional loan too.
Research Assistance Programs
There are many areas around the country that will offer programs that make it easier for first-time buyers to get help that they need. Some programs will help with closing costs and others will even give some of the down payment. There are also some tax credits that you can earn when you do your taxes, which can help you save more money than before.
Sometimes these will be state programs that you can take advantage of. Other times they will be more local, such as the city or the county. Some will be based on your income or the area where you are going to purchase the home. Ask your lender or your agent to see if they know about any programs you can utilize.
Compare Mortgages
Never go with the first mortgage offer you are given, without checking out others as well. It is best to look at loan estimates for the same kind of mortgage from multiple lenders. This gives you a chance to compare costs, including origination fees and interest rates so you can get the best deal. You may be surprised at the variance that comes with different lenders.
It is also possible that lenders will offer you a chance to purchase some discount points. These will be fees that the borrower is able to pay upfront to lower the interest rate. This makes the most sense if you are looking to stay in the home a long time and you have the extra money. You will need to use a points calculator to help you decide.
Get Your Pre Approval Letter
You should consider getting a mortgage pre-approval letter to help out when you want to make an offer on a home. Many sellers will not look at offers that do not have this letter. It is meant to help show the agents and the home seller that you are a serious buyer and will often give you an edge in this market.
You must apply for pre-approval when you are ready to start home shopping. A lender is going to pull your credit and then review the documents. This helps you to verify the debt, assets, and income. You can shop and receive pre-approval from more than one lender within 15 days and not have a negative effect on your credit score.
Getting Prepared for Your Home Purchase
Purchasing a home is a big deal. You want to make sure that you are doing it right so you can get into your new home and enjoy it in no time. Follow some of the simple steps above and see just how easy it is to purchase a home as a first-time home buyer.