Are You Ready to Be a First Time Homebuyer?
Home ownership, for most Americans, is both a dream and a sign of financial independence. But buying a home can be a scary proposition for many first-timers who may not understand everything about this complex process.
Here are some steps you need to take to become a first-time homebuyer:
- Get your down payment together
First-time homebuyers can generally get a loan with as little as 3% down. However, this may come with additional fees and requirements such as having to buy private mortgage insurance. Twenty percent is often a better option for a down payment, but that can put home ownership out of most people’s range. A good 10% down means $10,000 for every $100,000 of a home that you want to buy.
- Research mortgages
Next, you are going to want to look at different mortgage options. Become familiar with conventional loan programs like Fannie Mae and Freddie Mac as Federal Housing Administration (FHA) loans. If you are a veteran, you can also look into VA loans that may require no down payment.
- Set your budget
Look at your finances and determine what you can afford to spend each month on a mortgage. This will prevent you from wasting time looking at houses that are outside of your budget range and keep you from getting in over your head with a mortgage that you can’t afford.
- Shop around for interest rates
Don’t take the first bank you look at as the best for interest rates. Saving just a fraction of a percentage point has the possibility to save you thousands of dollars in the long run.
- Get pre-approved
One of the best things that you can do as a first-time homebuyer is to come to your real estate agent armed with a pre-approval from a local bank. This can give you an advantage when you make an offer on a home as an owner will generally choose someone with pre-approval over someone without it.
- Research the neighborhoods
If you are looking for a home, you need to list out the amenities you are looking for—such as proximity to public transit or shopping sites or the quality of the schools. Once you start looking at neighborhoods, be sure that they fit into these qualifications. Before you make an offer on a home, you should also research the crime rate for that area.
- Don’t forget about closing costs
Another thing you need to do when you are calculating your budget is to remember to figure in closing costs. Estimate between 2% and 5% of your total loan when you are making this figure.
Being a first-time homebuyer can be an exciting (and terrifying) prospect. But with a lot of research and acquired knowledge, you can take the nervousness out of this process and perhaps even find the home of your dreams.
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