A successful home buying experience is all like any big project, a successful home buying experience is all about getting the details right from start to finish. These tips for first-time homebuyers will help you with all the process:
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You should start saving money before considering buying home
When you decide to save for a home, these are the things you want to consider:
Down payment: Your down payment requirement will depend on the lender and the type of mortgage. Fees as little as 3% are allowed for first-time homebuyers by some traditional loans. But these small down payments can be a very challenging way for you to save. You can use a down payment calculator to set this, for example, a 3% down payment on a $250,000 home is $8,750.
Closing costs: are the fees you pay to finalize the mortgage process, which range usually from 2% to 5% of the loan amount. The seller should be requested by you to pay a part of your closing cost. There you can save some expenses.
Move-in expenses: We all know when buying a home we may need some cash. You should consider setting aside some money for home repairs, home updates, and furniture.
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Figure out how much you can afford
You should figure out how much you can spend on a house before starting the process of shopping. By making calculations, based on your income and your debts, your credit score, you should be able to set a price range.
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Try to strengthen your credit score
If you want to know if you are qualified for a mortgage – you should check your credit score. This also can affect the interest rate lenders will offer. Your credit score can be strengthened if you take these steps:
● Credit reports – are the free copies you should take from credit bureaus — and then discuss any errors that could damage your score.
● Keeping your credit balances low and paying your bill is one of the ways to strengthen your credit score.
● Keep your current credit cards open – because closing a card will lower your score.
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Explore the mortgage options
There are a lot of mortgages that can be great options for you as a first-time buyer. They differ on the eligibility requirements. Below are the best options you can look for:
Conventional mortgages are usually not backed up by governments. Some common loans that are targeted by first-time buyers require as little as 3% down.
The second options are FHA loans. They are guaranteed by the Federal Housing Administration and can allow fees down to 3.5%. USDA loans are backed up by the (U.S. Department of Agriculture). These loans are perfect for rural homebuyers – and require no payment. VA is another type of loan that is guaranteed by the Department of Veterans Affairs. Veterans are allowed to use these types of loans – they require no payment.
There are a lot of options in the mortgage terms. Most homebuyers seek a 30-year fixed-rate mortgage, which has an interest rate that stays the same. As everyone knows that a 15-year loan has a lower interest rate, but the monthly fees are higher.
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Research first-time homebuyer assistance programs
A lot of states provide different programs for first-time homebuyers, which have low-interest rate mortgages. Some of the programs offer tax credits too.
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Compare mortgage rates and fees
The Consumer Financial Protection Bureau recommends requesting loan calculations for the same type of mortgage from various lenders to compare the costs. Discount points – are sometimes the opportunity that is offered by lenders, where the borrower can pay a lower interest rate.If you do have the money in cash, and you are planning to stay there for a long time – a great way is to use discount points.
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Get a preapproval letter
The lender can offer you to loan a certain amount under specific terms, this is often called a mortgage pre-approval.
If you have a pre-approval letter you can show home sellers and real estate agents that you are a very serious buyer, and it can be an advantage over other home shoppers. When everything seems good to start home shopping – apply for pre-approval. Reviewing your documents to verify your income and debts – is what a letter will do. If you choose to apply for pre-approval from more than one lender, it doesn’t hurt your credit score, as long as you apply in 30 days.
Note: “On many websites, it is claimed that real estate agent’s commission rates are 6%. While this has been true for the last 20 years, now it’s statistically outdated. In 2021, the actual average real estate commission rate is 5.46% in the USA.”