Buying a home can be overwhelming, especially if it is your first time doing so. It requires a lot of planning and making quick yet calculated decisions. For instance, you have to figure out what kind of a home you want to buy and if you wish to pool in your savings or borrow a loan. Here are a few tips that will help make the home-buying process seem a lot less daunting.
Check your credit score
It is important to note that your credit score will determine whether you qualify for the mortgage or not. A credit score also helps determine the interest rates on which lenders will offer you the loan. So, make sure to get free copies of your credit scores from credit bureaus like Experian, Equifax, and TransUnion.
You can ensure a good credit score by paying all your bills on time and keeping your credit card balances as low as possible. Experts recommend against closing a credit card, as this will increase the portion of available credit, negatively impacting your credit score.
Select the right mortgage
Once you are sure about having a good credit score, it is time to select the right mortgage option. There are a variety of mortgages with different down payments and eligibility requirements. While the government does not offer conventional mortgages, some of them offer down payments for as low as 3% targeted at first-time home buyers.
FHA loans are Federal-backed home loans that offer down payments of around 3.5%. USDA and VA loans require no down payment and are for rural homebuyers and individuals who are or were in the military. So, if you are borrowing a loan, it is recommended to choose according to your financial goals. This should depend on whether you are looking to pay higher monthly payments with lower interest rates or vice-versa.
Pick the right neighborhood
Consider the pros and cons of different types of houses, depending on the lifestyle you choose to have and your budget. For instance, an apartment or a condominium might be more affordable than a single-family home. That said, living in an apartment does not guarantee complete privacy, as you have shared walls with the neighbors. Budgeting for homeowners association fees is vital when buying condos, townhomes, or apartments in planned and gated communities. If you have a low budget, you can consider buying a fixer-upper—a single-family home requiring many updates and repairs. They sell for less per square foot when compared to ready-to-move-in homes. But keep in mind that you may have to set some money aside for remodeling. Note that renovation mortgages finance both the house price and the cost of renovations in one loan.
It is also essential to think about long-term needs as the property you are investing in might be your forever home. Choose a neighborhood with good amenities and make sure that it is easy to commute to work, even during rush hour.
Use the services of a real estate agent
A realtor or a real estate agent is a professional who can get you residential properties by assessing your needs. They can also help you bargain or negotiate on the amount to be paid on the shortlisted property. Before you choose a real estate agent, make sure to read any reviews on them and interview them.
Keep a fixed budget
First-time homebuyers usually get too emotionally invested in buying a home. They might want to feel secure and have a desired lifestyle they had envisioned for themselves. This might make them push their budget beyond what they can afford. As a result, they might end up borrowing a loan with higher interest rates or monthly payments that might be difficult to pay off. This may further damage their credit score. Hence, it’s recommended to stick to a budget.
Work with a home inspector
Once you have shortlisted your dream home and negotiated a deal, hire a professional inspector to help you make sure it does not require any repairs. If they find defects, you can ask the seller to repair the house before you move in. Make sure to add a home inspection contingency in the money deposit letter to allow you to invalidate an offer and not lose your deposit in case of extensive repairs.
When you buy a home, it is important to be responsible for the purchase. Homeownership may bring unexpected repair expenses. Having an emergency fund for your home is recommended to avoid getting caught off-guard. Regular maintenance can save you money, as it will decrease future repair costs.
