Buying new property can be a challenging process, even more so if you're a first-time home buyer. If you're a young adult, this is probably the most significant purchase you've made in your life, and the home-buying process can often be unfamiliar and complicated. However, to make your first- time home buying experience a little more comfortable, below are a couple tips to guide you along the way.
1. Start Saving Early
Although we suggest that you put down 20 percent on a home, most first-time home buyers can only afford to put down three percent. Putting down less than 20 percent means higher mortgage and insurance rates, which is why it's so important to start saving for a down payment early. However, you should use down payment calculators to determine how much you need to save and start budgeting.
2. Review Your Credit Scores
When you take out a mortgage loan for your house, your credit score is one of the top factors they consider. Credit also determines your loan terms and interest rate. So, before you send in your mortgage application, make sure you review your credit and dispute any errors you notice to boost your credit before a bank checks it.
3. Stop Applying for New Credit Opportunities
When you open up new credit accounts, you let a lender place a hard inquiry on your credit scores. This can temporarily damage your credit. If you are applying for a mortgage, this new lower score could discredit your application and lower your chances of being accepted by the financial intuition.
4. Figure Out How Much You Can Afford
Now, before you start searching for your dream home, you should figure out how much you can afford. You should talk to your bank or financial advisor to determine how much you can safely spend in your budget. This will make it easier to start your house search.
5. Lookup State and Local Assistance Programs
Besides federal programs, most states offer assistance programs. These programs offer a variety of benefits, such as tax credits, interest-free loans, and reduces down payment loans for first-time home buyers. Also, you may have local assistance programs available to you, which you may be offered by either your municipality or county.
6. Figure Out What Kind of Property You Want to Buy
You likely know what kind of home you are looking for. Although most home buyers are looking for a single-family home, it depends on how much room you need. For example, if you don't need a whole lot of room and want extra amenities, you're better off looking for a condo.
7. Research and Compare Mortgages
Before signing on for a mortgage, you should make sure it's the right deal for you. Are you willing to pay larger monthly payments for a shorter repayment term? Or, are you looking for a mortgage plan that allows you to make lower repayments for a longer amount of time? It's usually best to research and compare all your options before going with one or the other. The Consumer Financial Protection Bureau reports that comparing three different mortgage rates can save you over $3,500 in five years.
8. You May Have to Compromise
You're never going to find the perfect home, meaning you may have to compromise along the way. However, it's totally up to you on what to compromise. Keep in mind that you can always make repairs and changes later on, too. After you buy your home, you can begin comparing swimming pool prices and looking at new appliances for the kitchen.
9. Negotiating with the Seller
Negotiations can always be done with the seller of the property, in fact, it can even save you hundreds of dollars by doing so. Take a look around the property and write down any repairs you notice, you can use these to your advantage to lower the asking price of the home. Or, ask the seller if they're willing to pay the closing costs. Although there are some things you simply can't negotiate, it doesn’t hurt to ask.
