Are you finally ready to take the plunge and buy your first home? If so, congratulations! Buying a house can be an exciting and emotional process, but it can also be very complicated, and it’s easy to miss important details if you don’t know what you’re doing. To help get you started off on the right foot, here are ten tips to keep in mind while you navigate the process of buying your first home.
1) Get pre-approved for a mortgage
Before you start shopping, it's important to get pre-approved. That way, you'll know how much money you can spend and what type of mortgage you qualify for. It will also help weed out homes that are outside your price range or not in the right neighbourhood. You don't want to get too far along in the process only to find out you can't afford it!
So what do I need to do?
- Find a Realtor® - A good Realtor® should be knowledgeable about the local market and can help match you with a home that fits both your needs and budget.
- Set up an appointment - Once you've found a potential home, make an appointment to see it during regular business hours with both the seller and broker present.
- Bring copies of all paperwork - The first time you set foot inside the house, bring copies of everything including paycheck stubs, bank statements, tax returns and any other documents that might help seal the deal.
- Be patient - Buying a home is usually a long process so try to stay patient as it takes time to find the perfect house.
- Get referrals from friends and family - Ask friends, neighbors and coworkers who they used when they bought their own homes. They may have connections that could help you find your dream house before anyone else does!
- Put down at least 20% deposit - Most people put down at least 20% of the purchase price when buying a home.
- Consider location - Location is often one of the most important factors when buying a home.
2) Know your credit score
The first thing you need to do is make sure your credit score is in good shape. Get a copy of your credit report from each of the three credit bureaus (Equifax, Experian, and TransUnion) and make sure there are no errors on it. If there are any errors, dispute them with the credit bureau and have them corrected. As long as your credit score is 700 or higher, then you should be able to get a loan. You might want to consider getting prequalified before looking at homes so that way you know how much money you will be able to spend.
3) Determine your down payment
A down payment is the amount of money you will pay upfront to purchase your home. The larger the down payment, the lower your monthly payments will be. The average down offer is 20% of the purchase price. For example, if you plan to buy a $200,000 home, you should try to put at least $40,000 down in order to get a mortgage with low monthly payments.
4) Consider your housing needs
As a first-time homebuyer, you need to be prepared with the right questions and information before you start your search.
The following list will help walk you through some of the key steps.
- Decide if you want a single-family home or a condo?
- What size home do I need?
- How much can I afford?
- What are my down payment options?
- How do I qualify for a mortgage loan?
- Do I have enough money saved up for a down payment?
- Can I afford monthly payments after taxes, insurance and maintenance costs?
- Do I have any credit issues that may affect my ability to qualify for a mortgage loan?
- Will owning my own home help me build a credit history over time?
- Is it better to rent or buy a home?
5) Do your research
Buying a home can be a daunting task, and the process may seem a little more complicated than you originally thought. It is important to arm yourself with as much information about the homebuying process as possible so that you are able to make an informed decision when it comes time to purchase your first home. Here are some tips that will help make things a little easier:
6) Get help from a real estate agent
When it comes to buying your first home, there are a lot of decisions to be made. A real estate agent can help by answering any questions you may have and helping you navigate the complicated process. Your agent will also make sure you're aware of every possible tax deduction and get you preapproved so that you know how much house you can afford. The more information they have, the better they'll be able to help you find what's right for your family.
7) Have a realistic budget
The home is the most expensive purchase you will make in your life. It is important to know what a realistic budget looks like so that you don't overpay or overextend yourself.
Here are 5 tips to help you stay within your means as a first time buyer:
- Create a realistic budget with both a high and low estimate so that there's plenty of wiggle room.
- Know how much house you can afford. A rule of thumb says you should spend no more than 30% of your gross income on housing costs, including mortgage, taxes, insurance, and utilities.
- Save money by avoiding hefty mortgage closing costs. Ask about origination fees when comparing loan offers from different lenders; some offer loans with no closing costs at all!
- If you're new to real estate investing, start small by buying a rental property instead of an investment property right away.
- There are several government programs available to help people buy homes. One example is USDA rural housing loans which enable qualified buyers to get mortgages for up to 100% of the appraised value of the home, making it possible for someone who has a lower credit score (or higher debt ratio) to qualify for homeownership.
8) Don't be afraid to negotiate
Don't be afraid to negotiate. As a first time buyer, you have more leverage in the negotiation process than a seasoned home buyer would. In some cases, the seller will even ask you to name your price! This is especially true if you are in a hot market and there are multiple offers on the table. It can help the seller to know that they don’t need to wait for someone who has been looking at homes for months or years. The way the housing market is going, it may not make sense for them to list their property now instead of waiting until next year when prices could go up even higher.
What I need to do as a first-time buyer? Help For First-Time Buyers: Remember to set aside money for taxes: Make sure you set aside money for closing costs, but also remember to include the funds necessary to pay any taxes owed upon sale. You might not think about this because you're preoccupied with figuring out how much down payment you'll need, but real estate taxes are often a significant portion of homeownership expenses every month.
9) Get a home inspection
If you are a first-time home buyer, ask your real estate agent to recommend a qualified home inspector. The inspection will help determine any underlying issues with the property so you can make an informed decision before purchasing. A seller may refuse to fix any problems that were identified during the inspection.
First-time buyers should also be aware of: homeowners insurance, PMI (private mortgage insurance), and interest rates when shopping around for a loan.
10) Make sure you're insured
It is important to have the right insurance before buying a home. You don't want to find out too late that your mortgage holder requires you to be insured, or that you don't have enough coverage. First-time buyers also need to get their finances in order, so they can qualify for a loan and make sure they're in the best position possible when it comes time to buy.
It's also wise to keep an eye on where rates are headed by checking them regularly so you'll know when it's time to buy.