If you’re still renting your place, the idea of buying a house can feel quite overwhelming. A recent TD Bank survey of first-time home buyers found that 64% of people who have never owned a home are concerned about affordability due to their high mortgage rates. Despite these concerns, half of the half are working to save money for a down payment. If you’re one of them, read some smart moves of money that can put you on the path to buying a house well.
House Hunting Tips for First-Time Home Buyers
1. Check your credits (and working on it)
The higher your credit score, the higher your mortgage interest rate.
Pull the report
Get a thorough understanding of where your credits are by getting a free copy of the report at AnnualCredItreport.com. It’s not even one free free ticket. This site allows you to draw reports every week without paying anything.
It is important to note that credit reports may appear different depending on the credit department. There are three major credit reporting agencies in the United States.
- Experian
- Equifax
- Trans Union
It’s wise to look at all reports, as you don’t know what reports your lender will analyze. “Look for errors or past accounts that may have gone to the collection,” says Ralph Dibugnara, president of New York City-based Home Qualifications, an online resource for home buyers. “These liabilities can be created when applying for a mortgage. If something is wrong, contact your creditor and see if you can sort them out.”
I’ll fix your credit and then monitor it
In addition to contacting the department if you find any mistakes, follow these steps to maintain your credit in the best possible form.
- Repay your credit card balance. Most lenders prefer to see credit utilization rates below 30%, according to Lindsey Shores, business development manager for federal credit unions at schools. “For a lot of people, this number is something they have to plan and plan to pay back to achieve,” she says. If that number is exceeded, try paying back the balance.
- Pay your bills on time: Whether you are about to buy a house or not, you can follow this step to create or break your credit by paying on time each month.
- Take advantage of our free credit monitoring tools. Many banks have free credit monitoring tools built into their mobile apps, making it easy and frequent checking of their credit scores. “If your credit score changes, or if there is any suspicious activity in the report, you will receive a notification,” says Dibugnara.
2. Limit your budget
When building a budget to narrow your property search, consider not only how much you can get, but also whether you can handle the costs repeatedly once you buy a home. Consider these important items:
- principal and interest: This is the majority of monthly payments and once you take out a fixed-rate mortgage, this chunk does not change over the course of your loan.
- Homeowner Insurance: How much you pay to protect your property will vary greatly. If you are purchasing in areas where there is a high risk of floods, wildfires, or other bad weather, you should be prepared for a higher, ever-growing premium.
- Property tax: Your property taxes appear to vary from location to location, and in most cases it increases as the value of your home increases and/or your local government will need to raise them for their budgets.
- HOA Fees: If you are looking at homeowners’ association condos or homes, ask how much you pay monthly for the HOA fee. If you’re looking at a building with a gym, pool and other amenities, these can be very sudden.
In addition to these expected costs, we recommend that you throw away your money regularly for maintenance and unexpected repairs.
“As a rule of thumb, I tell my clients to prepare to spend 1% to 3% of the value of the house each year (cost)” If the house you buy is older, larger, or more maintenance amenities like a pool, you may need to put it aside more.
3. Think about your needs and desires
Finding the ideal location and address can take longer than expected, so start scouting your neighborhood early in the process.
“I drive around the area at various times of the day and night,” says Bill Golden, a real estate agent and associate broker at Keller Williams Realty Intenna. “This helps you feel what you like and dislike.”
In addition to identifying your neighborhood, it’s a good time to narrow down your preferences for the home itself by considering these important questions.
- What kind of house are you looking for?
- What can I compromise on?
- What is a deal breaker?
- Can you please look at the old properties that may require some updates, or do you need a ready property?
Think about what you like and dislike about where you live now – it will help inform you of a list of your needs and requests.
4. I will settle my finances
Regardless of your income level, you should be able to document that potential lenders have a stable revenue stream.
“Your income and the amount you earn each month will be scrutinized by the lender. The lender will look for employment history over the past two years and want to see consistent income.
If you are self-employed, prepare for closer scrutiny than those who receive salary or hourly wages.
As for your liquid funds and overall financial health, in addition to reviewing your credit report, mortgage lenders usually look at bank statements for the past two months when evaluating your application. If you plan to create a deposit from other assets, such as a down payment gift, or in a savings account, do so before that 60-day window. This gives the funds “seasonal” time.
It is also best to avoid opening new credit accounts or loans or obtaining more debts at this stage, Dhibgunala adds. All of these activities can probably be viewed by your credit report.
For more information, see How to Save Down Payment
Tips for finding the right mortgage
5. Comparative store mortgage lenders
At this point you need to know what monthly payments you’re comfortable with, the area you can afford, and how much you can put. Now it’s time to shop for a mortgage. Consider these factors:
- Comparison Shop: Compare mortgage fees from at least three different types of lenders with different types of mortgages.
- What others have to say: Read lender customer reviews online to understand what your experience with individual lenders is like.
- Interacting with lenders: “Even in this market, you can find competitive rates and services, but we want to pay close attention to lenders’ responses and communications,” says Dibgunara.
- Mortgage Terms: It’s a good idea for lenders to quote you, as well as all mortgage terms as well as focusing. What is the late fee? What is the estimated closure cost? Is there a prepayment penalty? If you can get a mortgage from a bank you already have an account, can you get a better deal? If other terms are generally preferred, it makes sense to choose a loan at a slightly higher rate.
learn more: Different types of mortgage lenders
6. Please approve in advance
Once the lender has settled down, they will be approved in advance for the mortgage. This requires income and financial documents, and organizing the documents in advance will help the process run smoothly. You will also prepare for mortgage underwriting. This requires similar documents.
Unlike prequalification, the predicted size of the loan you can get, preapproval is an official letter from a lender, which shows how much it will lend to you. Pre-approval is a much stronger position when you are making an offer at home, allowing the offer to be accepted and the process will be easier when you actually apply for a loan.
Preapprovals usually expire after 90 days, says Dibugnara, so ask your lender how good it will be. If you are a first-time home buyer with substantial debt or so-called credit, we recommend applying for pre-approval as soon as possible to identify the issue you want to fix.
“Once you set up pre-approval, you stick to your budget and savings plan and keep paying all your debts on time,” Hecker says. “Don’t make extraordinary purchases or take on additional debts.”
7. Looking for down payment support
There are many first-time home buyers and down payment assistance programs, including at local, regional and national levels, that help cover down payments and closing costs. However, these are not for everyone. To get down payment assistance, prepare for these eligibility requirements.
- Usually earning less than a certain amount, which varies depending on the location and size of the home.
- Buy a home that does not exceed the maximum amount that may differ based on targeted and non-targeted areas
- Get rid of loans offered along with the state Housing Authority
These programs are usually limited to borrowers with incomes below a certain level (based on location), and can also place a cap on the price of a home. Please note that many of these programs have conditions that state that you need to live in the home for a period of time to avoid tax penalties that can work when you sell your property earlier than expected to earn a profit, in order to qualify for loan leniency.
In many cases, lenders can provide information about available programs and what can be paired with the mortgage.
Tips for buying your first home
8. Working with real estate agents
After getting the fundraising square and letter at hand, the next step as a first-time home buyer is to hire a real estate agent or real estate agent.
An experienced real estate agent who knows the area you are particularly likely to buy can advise you on the market situation and whether the price of the home you want to offer is a reasonable price. Agents can also go to the bat to identify potential issues in their homes and neighbourhoods that they may not be aware of and negotiate prices and terms.
You can start by asking a friend, relative, or colleague for a referral. You can interview a few future agents and feel who is a solid match in terms of personality and expertise.
“Don’t choose (an agent) blindly. Make sure you’re someone who works in the general area you’re looking for and you’re someone who feels comfortable,” says Golden. “If you show up every day, there’s a good real estate agent on top of it and you can see a new list as soon as it’s available.”
9. Negotiate with the seller
Even if you see a dream house, don’t be afraid to negotiate a price with the seller. It’s difficult in the red-hot real estate market, but in some parts of the country, more homes are beginning to see sales below the asking price. Consider these negotiation tactics when you are working to get a fair deal:
- Use comps to justify lower offers. A low offer can anger the seller, so work with your agent to find out what comps justify why the seller should consider the terms. Have nearby properties with additional parking recently sold for the same amount? Are there other similar homes listed for better amenities? Back up negotiations with evidence from other markets.
- Ask for concessions based on the home inspection report. Are some of the electrical wiring not correct? Does the furnace appear to be nearing the end of its lifespan? Do I need to replace the windows immediately? If your home inspector reveals some minor issues with your home, don’t be afraid to ask for concessions that require the seller to cover the chunk of your closure costs. And if the inspector reveals some key issues, be proactive in your negotiations and don’t be afraid to leave the deal completely.
- Request a different closing timeline. It’s not just money to negotiate the purchase of your home. It’s time again. Depending on your needs, you can ask the seller for a deadline. For example, if you really want to avoid paying a month’s rent, don’t be afraid to require the seller to prepare to move in early.
10. Create a contract
Once you’ve found a home and prepared to make an offer, you’ll work with your real estate lawyer to write down the conditions and circumstances that will allow you to leave the transaction. These are known as contingencies and often include:
- Key issues with home inspections
- Refusal to apply for a mortgage
- Lower rating than offer price
If these terms are written and written by deadline, you can regain a serious money deposit if the transaction does not go as planned.
Conclusion
For the first timer, buying a house can feel overwhelming and endless. But by breaking the process down into stairs and working on one at a time, you can stay focused and get the job done. Do your research in advance and work with a trusted real estate agent to help you stay on track throughout the process. Stabilizing your finances and limiting other high-value purchases will help you qualify for a loan and enter your first home.
Additional Reports by Zach Meain
