The decision to purchase your first home is a significant milestone that can bring with it a mix of both excitement and anxiousness. The following helpful tips will assist you in navigating the home buying process with ease, ensuring you make well-informed decisions and achieve your homeownership goals.

1. Balance Your Housing Needs and Wants

Identify what you absolutely need to have in a home versus what you simply want in a home. Some essential factors could include square footage, number of bedrooms and baths, location, and proximity to work and schools. Wants might include a large backyard, a specific architectural style, or a swimming pool. Prioritizing your needs over wants ensures you don't compromise on essential aspects of your lifestyle.

2. Check Your Credit

Your credit score is a major factor in determining your mortgage eligibility as well as the interest rate you receive on your new mortgage. You can obtain a free copy of your credit report once a year from annualcreditreport.com. After receiving your credit report, review it closely for errors. If your score needs improvement, focus on paying down existing debts and making timely payments.

Most mortgages require a credit score of 620 or above. While there are certain mortgages that allow for a credit score of under 620, you can expect to pay a much higher interest rate for these types of mortgages.

3. Plan For Your Down Payment

Your down payment will impact your mortgage terms and monthly payments. While 20% down will help you to avoid paying Private Mortgage Insurance (PMI), there are many first-time home buyer mortgages available with lower down payment options in the 3%-5% down range. There are even some zero down options available for first-time home buyers based on specific eligibility requirements.

If you don’t have a down payment saved up, and you also don’t qualify for a zero down mortgage option, you can explore the possibility of receiving all or a part of your down payment as a gift from a relative.

4. Don’t Forget Closing Costs

Closing costs are the fees and expenses a buyer incurs to finalize a real estate transaction. Closing costs can include fees such as recording fees, settlement fees, underwriting fees, an appraisal fee, escrow deposit, etc. Closing costs typically average between 2%-4% of the loan amount.

When negotiating a purchase contract, some first-time home buyers request that the seller cover some of their closing costs, or in some cases, all of their closing costs. There are also ways to set up a mortgage to create a lender credit that will cover all or a part of your closing costs. Ask your loan officer for more details.

5. Compare Lenders

Shopping around for the best mortgage can save you thousands of dollars over the life of your loan. Compare interest rates, fees, and terms from various lenders. When comparing interest rates between lenders, be sure to make note of the loan points each lender is charging for a particular rate. Many lenders advertise really low interest rates but charge a lot in discount points, so be sure to compare apples to apples when it comes to interest rates.

If you’d like help comparing the mortgage quotes you receive with what we can offer you, please contact us anytime, and one of our loan officers would be happy to assist you.

As a side note, when comparing mortgage lenders, be sure to read their online reviews and take note of how responsive they are in their communication to you.

6. Get a Mortgage Preapproval

Getting preapproved for a mortgage provides clarity on how much you can borrow and shows sellers you are a serious and well qualified buyer. This can put you at a competitive advantage, especially in a multiple offer situation. In addition to completing a loan application, you will need to provide your lender with financial documents such as W-2s, recent pay stubs, and bank statements to get a preapproval letter.

7. Avoid New Debts During the Home Buying Process

New debts can impact your credit score and debt-to-income ratio, affecting your mortgage qualification. Try to avoid making large purchases or opening new credit accounts while searching for a home to purchase.

8. Choose the Right Real Estate Agent

A knowledgeable real estate agent is invaluable, especially for first-time home buyers. Look for an agent with experience in your target area and price range. Seek recommendations from friends or family and talk to multiple agents to find one who understands your needs and communicates effectively with you.

9. Research Potential Areas and Neighborhoods

You should investigate potential neighborhoods thoroughly using the numerous free online tools that are available for this type of research today. Consider safety, schools, local amenities, and future development plans. Consider visiting the area at different times and days to get a great feel for the area and neighborhood.

10. Stick to Your Budget

It's easy to get caught up in a bidding war or fall in love with a house that is over your budget. Remain disciplined and remember your long-term financial goals. Overspending can lead to stress and financial strain down the road.

11. Negotiate a Contract with Favorable Terms

Securing favorable contract terms can significantly impact the ease and success of your home purchase transaction. Favorable contract terms are often negotiated with the assistance of a good real estate agent. Examples of favorable contract terms for home buyers may include seller concessions towards closing costs, adequate inspection and finance contingency periods, seller paid title policy, and of course, a great purchase price.

12. Get a Home Inspection

Never skip the home inspection. This step can uncover hidden issues that could cost you significantly in repairs. An inspector will check the home’s structure, roof, electrical systems, plumbing, HVAC, and more. You can then use the inspection results to negotiate repairs or a price adjustment with the seller.

Final Thoughts

Purchasing your first home is a journey filled with learning and excitement. By following the helpful tips mentioned in this article, you can make more informed decisions, avoid common pitfalls, and smoothly transition into homeownership. Remember, thorough research, careful planning, and a patient approach are all key to a successful first home purchase.

Do you have any mortgage related questions that we can help answer at this time? Interested in talking through your best mortgage options and getting an interest rate quote from us? If so, we’re always available to help. Please feel free to reach out anytime!