The thought of becoming a homeowner can make you feel a whole lot of emotions: anticipation, excitement, worry, and a sense of being overwhelmed. On top of all these emotions, you’re probably stressing about where to even start!
We have 10 tips that’ll help you take the leap and buy your first home.
1. Don’t panic
Even though it may be a strong seller’s market in 97% of the country, that doesn’t mean you’re not going to find a house. Interest rates are low and there’s a lot of people entering the market. Don’t panic!
2. Is homeownership right for you?
Homeownership isn’t something you just dive into. You need to determine if this is the right time to buy a house. You’ll want to jot down all of the things that go into homeownership (maintenance, lawn care, property taxes, insurance, etc.) and think long and hard if you’re ready to take on all that responsibility.
3. Save up now
Before you even think about buying a house, you’re going to want to start saving money so you can have the preferred 20% down payment. However, if you’re struggling to save that much money, there are programs where you can put down as little as 3%.
4. Determine how much house you can actually afford
When you’re trying to decide how much house you can afford, you’ll need to take all of your sources of income and add that up. You’ll want to do the same for your monthly bills/expenses as well. You’ll then want to divide your gross income by your monthly debt and this will be your debt-to-income ratio. Lenders typically won’t approve mortgages to anyone with a DTI over 43%. The lower your DTI, the better.
5. Budget like you’re already a homeowner
Along with your mortgage, insurance, and utilities, you need to think about other expenses. These expenses include homeowner’s association fees, maintenance costs, water, trash, and so on. Research will be necessary to find out the average cost for these expenses.
6. Keep an eye on your credit
Your credit score is going to be a large component lenders will look at when deciding if they’ll approve your application. Your credit score will also determine the interest rate. If your credit is less than stellar, you’ll want to monitor it to look for any derogatory marks, information that is incorrect, and even reach out for help to repair your credit.
7. Hire a real estate agent
Hiring a real estate agent early on in the game will be a valuable resource for information, insight, and advice. Of course, they’ll work hard to find you properties that check off all of your “needs” while staying within budget.
8. Know your options
Now that you are saving money and monitoring your credit report, you’ll want to research lenders, interest rates, and programs you may qualify for. Your real estate agent can help you find out all of these things.
9. Factor closing costs when saving
Along with saving for a down payment, you’ll want to begin saving for closing costs. Now closing costs aren’t going to be as high as 20% like the down payment, you’re still going to need between 2% to 5% of the total loan amount. You can ask the seller to cover closing costs, but consult with your real estate agent.
10. Give yourself some wiggle room
Once you’re approved for a mortgage, you don’t have to spend all of that money. You should give yourself some wiggle room and look at houses that are $25,000 below your budget. Why? Well, that extra money could be used for upgrades and renovations or it could be used in the worst case scenario and you’re in a bidding war.
First-time buyers needn’t stress out!
You may be a first-time buyer and there’s a lot to think about, but you needn’t stress out. These tips are a great starting point, but when you’re , ask them what should you know and do to prepare for when buying a property for the first time.