What are the first home buyer tips?
Let’s start with what does it mean to be a first home buyer?
A first home buyer is someone who has not owned a property before or has not owned a property in the last 5 years. First home buyers could be eligible for certain programs and incentives that ultimately help in making purchasing a home more affordable. Make sure to research your local towns and government programs to see what you would be eligible for.
This post is about first home buyer tips.
Let’s dive into the 7 first home buyer tips:
1. Check your credit score:
Your credit score will directly impact the mortgage rate and terms you’ll be eligible and approved for. Be sure to frequently monitor your credit score, so you can report and dispute any suspicious or fraudulent activity as soon as it happens. On the other hand, if your credit score is lower than you prefer, you can take the proper steps to improve it. This way, your credit score will be the most accurate and reflective of your situation.
2. Refrain from opening new lines of credit
One of the determining factors of your credit score is the duration of credit history. Which means, if you open a new line of credit, that automatically drops the average duration of your credit history dramatically. Think twice before opening another credit card.
3. Save for a down payment
This is likely the biggest hurdle for most people. Check this post out to find out tips on how to save.
Depending on what kind of property you’re looking at and location, it’s almost always more advantageous to have a larger down payment. In some ways, you’ll be able to dictate the terms or your mortgage. This will also make you ineligible to private mortgage insurance (PMI), which is ultimately an additional fee tacked onto your monthly payments. To avoid PMI, you will need a down payment of 20% of the purchase price.
However, a way around the 20% down payment could depend on the type of loan and your credit score. Conventional loans have a minimum down payment requirement of 5%, whereas FHA loans require a minimum of 3.5%.
4. Get pre-approved for a mortgage
Before you’re able to put an offer in, you must get pre-approved for a mortgage. This is where the mortgage companies will do a hard pull on your credit. This step, in particular, involves submitting an application to a lender. The lender then reviews your credit history, employment history, income, and other financial information. This helps determine how much they are willing to lend you.
Remember, a pre-approval is different from a pre-qualification. Pre-approval is more formal as it will result in a letter including the total amount of loan the lender is willing to provide you. A pre-qualification is less formal, as it just includes the approximate loan amount based on basic review of your financial information.
This step will give you an idea of how much home you can afford. This also shows sellers that you’re a serious buyer, because of the hard credit pull.
5. Research neighborhoods
There’s a lot that goes into the value of a house including: location of neighborhood, quality of schools, walkability scores, amenities, future potential, safety, and more.
These factors are not only important in impacting the value of your home, this is also a good time for you to determine what your must-haves are. Then, you can find which neighborhoods fulfill your must-haves.
6. Find a real estate agent to work with
If you’re new to the buying process, finding a real estate agent can be really helpful. Real estate agents also have the earliest access in homes on the market before they hit the public market (Redfin, Zillow, etc). So if you’re shopping in a competitive market, working with a real estate agent could be the best choice in snagging a home before everyone else gets notified.
7. Make a list of must-haves and have a budget before shopping.
Make a list of features that are important and considered your non-negotiables. It’s important to have a clear list of must-haves before you start looking for a home, so you don’t waste time looking at properties that don’t fulfill your must-haves. At the end of the day, you’ll be living in the property and have to come to terms with certain aspects the home does or does not have.
To reiterate, the top 7 are:
- Check Your Credit Score
- Refrain from opening new lines of credit
- Save for a down payment
- Get pre-approved for a mortgage
- Research neighborhoods
- Find a real estate agent to work with
- Make a list of must-haves and have a budget before shopping
There you have it! The 7 best first home buyer tips! Interested in learning more? Check this post out for ways to increase your income through side hustles!
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