Buying your first home is an exciting and life-changing endeavor, but it can also be overwhelming and stressful. With so many options available and a substantial financial commitment involved, it's essential to make an informed decision and get all the facts before committing to your new home.
The Real Estate Relief team has more than a decade of experience in the real estate space, both from the buyer and seller point of view, and we wanted to share a quick overview of things to consider as you take this exciting next step in your life.
Here are some tips on what to look for when buying your first home.
Determine your budget
Before you start searching for a home, it's important to know how much you can afford. While we all occasionally get suckered into window-shopping and gazing at dreamy mansion homes that are out of reach, at some point, we will need to have an honest look at our financial capabilities. Calculate your budget by considering your monthly income, expenses, and debts.
Keep in mind that owning a home involves additional expenses such as property taxes, insurance, and maintenance costs. Knowing your budget will help you narrow down your search and avoid disappointment. Set your search parameters to specifically exclude any homes that are out of budget to avoid temptation.
The average mortgage loan term is anywhere from 15-30 years, so be sure to keep this in mind when preparing to commit to your first-time home. Is this a property or city you’d be happy to commit to for at least 5 years? Do you have a stable income in order to be able to consistently make those payments long-term? Do you have an emergency fund that can cover at least a few months’ worth of emergency expenses?
Consider your future
Think about your future and how they may affect your homeownership. What’s your five-year plan? What about your 10-year plan? If you plan to start a family, consider a property with enough space to accommodate a growing family and proximity to schools and parks. If you work from home, be sure to look for a space that will accommodate a quiet working environment. Consider whether you are planning to resell the home in the future and if it has good potential for appreciation.
Get pre-approved for a mortgage
Know the difference between getting pre-qualified and pre-approved. While a prequalification letter can serve as an estimate of how much of a home loan you will be able to get, a preapproval is an official document from a lender that will outline exactly how much loan money will be offered based on financial information such as your credit score, bank statements, and W-2s.
Getting pre-approved for a mortgage will help you understand your borrowing capacity and budget when searching for a home. The best time to get pre-approved for a mortgage is at least one year before you decide to purchase. Many mortgage applications will contain an error (about a third!) which could affect your interest rate and ability to purchase a home. The pre-approval process allows you to get ahead of schedule and iron out any application issues you might have, so when the time comes, you know your Is are dotted and your Ts are crossed.
Save for a downpayment
The Federal Housing Administration (FHA) helps with a variety of things, including assisting first-time homebuyers with the purchase of their first home, includes assisting borrowers with their down payment. As a qualified first-time home buyer, you may be able to benefit from several assistance programs, including down payment assistance loans and grants.
Keep an eye on your credit
As you prepare to take out a mortgage and go through the preapproval process, you will want to keep your credit as healthy as possible. Lenders will access your credit report at the time of application as well as prior to closing, so you will want to avoid taking out additional loans or opening new lines of credit during that time, as they could hurt your chances of approval.
Continue paying bills on time and keep credit card balances to a minimum to improve your chances of getting approved for a loan. Show lenders that you are consistent and trustworthy when it comes to your financial responsibilities.
Identify your loan options
Understand the difference between conventional loans, FHA loans, USDA loans, and VA loans.
Conventional loans are the most common type of home loans and enable you to purchase a home with as little as 3% down.
An FHA loan might allow you to buy a home with less rigid financial and credit score requirements with a 3.5% down payment and a credit score as low as 580.
USDA loans are for low-income individuals wanting to buy a property in a rural area. You can get a USDA loan with 0% down, subject to household income restrictions. Just as FHA loans, USDA loans are backed by the government, and can lower up-front payment, but will still require you to pay closing costs.
VA loans are backed by the U.S. Department of Veterans Affairs an available exclusively for veterans, members of the armed forces and National Guard, and qualified spouses. VA loans can enable qualified individuals to buy a home with 0% down. There are a number of VA loans options including a home purchase loans, a jumbo loan, renovation loan, and more.
Establish your must-haves, nice-to-haves, and dealbreakers
Just as you made an inventory of your homebuying capabilities to keep you within budget as you embark on your home search. You’ll want to create a list of what you are looking for within that budget. If you’re looking for your first home purchase to be an investment property, you’ll want to consider a different set of factors than you might if you were seeking to start your first family here. A duplex is a great option for first-time investors as it allows you to live on the property while collecting rental income. If you’re starting a family, be sure you’re looking for homes with enough bedrooms and space to accommodate your growing family.
Every homeowner has a preferred style of a home that they envision living in. Whether you prefer a modern, traditional or contemporary look, ensure that the home's style suits your preference. You can also consider whether the home has the potential to be modified to suit your needs. While the dream home with your exact specifications may not be a reality, consider how easy it would be to convert into your vision. Be sure to factor these cost estimates into your budget. While the home that looks exactly like your Pinterest board may be out of budget, you could buy an under-budget home that needs a bit of extra love and remodel it yourself. New construction is another option to consider if you’re not looking for a fixer-upper.
Find a real estate agent
Working with a real estate agent will offer you the peace of mind of having an experienced professional who knows the local market in your corner. The process of buying a home, especially your first home, can be daunting, so you’ll want to surround yourself with knowledgeable people who can facilitate the process for you. Agents can help you by attending showings with you and helping you ask the right questions, deciding how much to put in for your offer, helping you negotiate with the seller, as well as helping walk you through the closing process to ensure everything is in order. If you’re ready to take this step, please reach out to our team at Real Estate Relief and we’d be happy to provide guidance to you along your homebuying journey.
Research the location
The location of your home is crucial as it can affect your daily life, commute time, and property value. Consider the distance from your workplace, schools, shopping centers, and public transportation. Be sure to check with your local city look for a safe and desirable neighborhood with low crime rates and a friendly community. Most city government websites will have a resource outlining the safety score or crime statistics of that given area. If you have friends living in the vicinity, ask them for their insights! Nothing like having boots on the ground.
Inspect the property
Before purchasing a home, inspect it thoroughly to avoid future expenses and surprises. Hire a professional home inspector to check for structural issues, plumbing, electrical systems, and other potential problems. Additionally, check for signs of mold, pests, and water damage. Do your research on your own as much as possible, but always work with a professional home inspector to ensure you don’t
Save physical copies of important documents
While we may live in a digital age where cloud is king and paper copies seem irrelevant or wasteful, you’ll want to make sure you have physical copies of your most important documents on hand just in case. Keep copies of your mortgage statements, deed, closing disclosure, and any other important documents in a locked, waterproof and fireproof location. Let a trusted individual know of the location and how to access it in case of emergency.
Now that you've read through our guide to purchasing your first home, you should have a better idea of what the process will look like and what's next.
Purchasing your first home is a lengthy process, and it can feel overwhelming at times. When you’re ready to take that next step, we are here to help. If you’re got questions about purchasing your first home and want to chat with a Certified Real Estate Relief Advisor, don’t hesitate to give us a call at (305)4-RELIEF or schedule a quick call with me directly using Calendly.
It’s Real Estate Relief's mission to bring transparency to the real estate industry, and we want you to have the straight answers you deserve when it comes to home buying and selling decisions.
Give us a call at (305)4-RELIEF or use the contact page to tell us a little bit more about your situation and how we can be of assistance to you. We're here to be your resource on all things real estate and we look forward to speaking with you.