A home is the biggest financial commitment most people will make in their lives, and owning a home is something that many aspire towards. When buying a home for the first time, the entire process can feel daunting. What’s my budget? How do I know if I’m overpaying? What should I be looking for when touring? The list goes on. Good thing we’ve got you covered. Here are the essential home buying tips for first time buyers.
Start Saving Money Early
The majority of the time, lenders expect an initial payment when you settle on a home to buy. A common number would be around 20% on the first initial down payment — if you’re lucky, potentially even less! Make sure you’re setting up automatic deposits into your savings as well as putting any tax returns, birthday money, or even work bonuses to good use!
Know Your Options
There are different types of mortgage options out there and the best place to start is by figuring out which one suits your financial needs.
Conventional mortgages follow the standards set by the government-sponsored entities Fannie Mae and Freddie Mac, and require as little as 3% down.
FHA loans are insured by the Federal Housing Administration and offer down payments as low as 3.5%.
Loans guaranteed by the department of Veterans Affairs (VA Loans) require no down payment at all.
Find what best suits you. Making a higher down payment will mean having a lower monthly mortgage payment. If you want the smallest mortgage payment possible, opt for a 30-year fixed mortgage. If you can afford larger monthly payments, you can get a lower interest rate with a 20-year or 15-year fixed loan.
Shopping for a house
When shopping for a house make sure you:
- Find the right Agent. Why? You will be working very closely with him or her, so make sure you get along well.
- Find the right house. Make sure to research schools in the area if you plan on starting a family. Look at safety and crime statistics. Understand what amenities are in the area, insofar as stores, hospitals, gas stations etc., are concerned.
- Look at the area during various times of the day to gauge activity.
Mistakes to Avoid
Failing to budget for closing costs. Closing costs can run between 2% and 5% of your loan amount in addition to your downpayment. Make sure you have enough set aside for both fees. Sometimes these can be negotiated down with the real estate agent or even the seller.
Failing to Budget for Moving Expenses. You finally have your dream home, but now you have to get all your belongings in and furnish it. You may require new furniture or the services of a moving company – so plan adequately for it.
Things you must know about home buying inspections
Not all inspections test for things like radon, mold or pests, so be sure you know what’s included. Make sure the inspector can access every part of the home, even the roof, and any crawl spaces. Attend the inspection and pay close attention.
Don’t be afraid to ask your inspector to check specific areas. They will not necessarily volunteer information, so make sure to ask questions! After all, you have to live in the home!