First time home buyers are the most prone to making mistakes. But unlike buying a used car, phone, gadget, or appliance, buying a home is a huge investment, which involves major risks. Therefore, if you are doing it for the first time, you can’t afford to mess it up.
Good thing is we’re here to help you with your cause. All we want is that you make the biggest investment in your life a successful one. Put in mind that once you get that loan to purchase a home, there is no turning back. You have to commit to it and be man enough to accept the responsibility of paying your mortgage.
So here’s a bunch of tips for you:
According to BankRate.com, you first should be focused on two things before even thinking about buying a house for the first time. These are your credit and your assets and liabilities. Read these helpful tips from the article “5 tips for first-time home buyers.”
Check your credit
The homebuyer’s credit score is among the most important factors when it comes to qualifying for a loan these days.
“In addition, the standards are higher in terms of what score you need and how it affects the cost of the loan,” says Mike Winesburg, formerly a mortgage planner with McKinley Carter Wealth Services in Wheeling, West Virginia.
Scour the reports for mistakes, unpaid accounts or collection accounts.
Just because you pay everything on time every month doesn’t mean your credit is stellar, however. The amount of credit you’re using relative to your available credit limit, or your credit utilization ratio, can sink a credit score.
The lower the utilization rate, the higher your score will be. Ideally, first-time homebuyers would have a lot of credit available, with less than a third of it used.
Repairing damaged credit takes time — and money, if you owe more than lenders would prefer to see relative to your income. Begin the process at least 6 months before shopping for a home.
Evaluate assets and liabilities
So you don’t owe too much money and your payments are up to date. But how do you spend your money? Do you have piles of money left over every month, or are you on a shoestring budget?
A first-time homebuyer should have a good idea of what is owed and what is coming in.
“You should understand a little bit about monthly cash flow,” says Winesburg.
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In the simplest explanation possible, you have to understand what your financial situation is. You can’t just go ahead and apply for a home loan if you know you don’t qualify. It may be because you have existing loans or perhaps you have trouble in getting a stable income as of the moment. If those are the cases, then you should fix your finances first.
Next, Amy Fontinelle of Investopedia.com, in her article “Top Tips For First-Time Home Buyers,” talked about some factors you should consider:
What type of home best suits your needs?
You have several options when purchasing a residential property: a traditional single-family home, a townhouse, a condo, or a multi-family building with two to four units. Each option has its pros and cons, depending on your homeownership goals, so you need to decide which type of property will help you reach those goals. You can also save on the purchase price in any category by choosing a fixer-upper, although the amount of time, sweat equity and money involved to turn a fixer-upper into your dream home might be much more than you bargained for.
What specific features will your ideal home have?
While it’s good to retain some flexibility in this list, you’re making perhaps the biggest purchase of your life, and you deserve to have that purchase fit both your needs and wants as closely as possible. Your list should include basic desires, like neighborhood and size, all the way down to smaller details like bathroom layout and a kitchen that comes with trust-worthy appliances.
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We agree that your needs should be the top priority when you start looking for the right type of home to buy. You have to consider things like the number of people who will reside, the location and neighborhood, and others. You just can’t put the aesthetic features of the home as the major influencing factor. In home buying, it is more than just the looks.
Finally, you should prepare yourself for other costs that you might have overlooked. These are the downpayment and the household expenses once you occupy your new home. Here are some tips about those two factors from Realtor.com:
Save for the down payment
Most mortgage lenders require a cash down payment of 5%, 10%, or 20% of the sale price. Buyers today may find it difficult to save for a large down payment, especially young adults saddled with substantial student loan debt. Traditionally, buyers who were unable to put 20% down had to pay an additional $100 to $200 per month to their mortgage lender for private mortgage insurance (PMI).
Factor in home improvement costs and monthly household expenses
With today’s low inventory of affordable homes for first-time buyers, many buyers will find themselves settling on a home that requires renovations or upgrades. These costs should be factored in at the start of the financing process so buyers are comfortable with their down payment and monthly payment and will have money available to make improvements. For buyers who have not lived on their own or for those who previously rented, the added costs of running a household can be a shock. Monthly costs for utilities, homeowner’s association fees, cable, and Internet, can add up quickly. Factoring these expenses in at the beginning of the mortgage financing process can help borrowers better assess their overall budget and a realistic monthly mortgage payment.
In reality, home buying is a very complex, tedious, and long process. It’s not like you just wake up one morning and realize you want to become a homeowner for the first time. It also comes with responsibilities, majority of which is financial. But then again, it is also very rewarding. You should consider it as an investment in the future.
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