How to Buy your First Home
It’s finally time - your first home buying experience! There’s excitement, nerves, and a little anxiety all rolled into one in this adventure. But not to worry, here are a few simple tips for first time home buying.
Get Pre-Approved
While you may want to start house hunting immediately, there are a few steps to get out of the way. First, it’s a great idea to get a mortgage pre-approval before looking for your forever home.
Pre-approval is a preliminary check of a borrower by a lender, which determines if they can give the borrower a pre-qualification offer. These pre-approvals letters are a document from your mortgage lender letting you know precisely how much loan money you can receive. This is based on financial information, including credit score and bank statements.
Loan Options
With loans, you have options! The following loans are the most common and will determine just how much you’re paying plus what time of home you’re able to purchase.
Conventional loans: As the name suggests, this is the most common type of home loan which allows you to purchase a home with 3% down.
FHA loans: With these, you’ll be able to buy a home with less financial and credit score requirements. You can get an FHA loan with a 3.5% down payment and a credit score of 580.
VA loans: These loans are only available for veterans and those in the armed forces, National Guard, and qualified spouses. You would be eligible to buy a home with 0% down. USDA loans: USDA loans are available for those who want to buy a home in a qualified suburban or rural area. You can qualify for a USDA loan with 0% down which is subject to restrictions with household income.
Save Up
Down payments are a chunk of change, but did you know about covering closing costs? Closing costs are certain expenses which are due at the time of signing the closing papers, and some of these include:
Attorney fees
Escrow fees
Title insurance expenses
Appraisal fees
If this is your first home, you can qualify for government-backed grant options which assist with closing costs, and it’s not unusual to ask the seller to cover closing costs. Your realtor will walk you through those options.
Needs VS Wants
If there’s one thing that is the most important in home buying, it’s determining what you actually need versus what would be nice to have. For instance, does your lifestyle need a walk-in pantry? Or four bedrooms when there’s just two of you living there?
Determine what you need (a two-car garage) and what would be nice but unnecessary (heated floors). An ideal option is to make a list of needs vs wants and stick with it while checking out homes. Remember to pick cities and areas conducive to your lifestyle and keep an eye on which school districts your home would be near.
Finally, making your budget is essential for happy home shopping. An easily made mistake is getting too invested in finding the perfect home and maxing out your budget and overwhelming yourself.
Don’t go over budget for a home no matter how much you love it and leave a nice chunk of change to make any renovations you have in mind.
Take plenty of time to decide on a home, and have fun while doing it!
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