The concept of a first-time home buyer often refers to an individual purchasing a home for the very first time. However, in certain scenarios, it could be extended to cover a broader range. For instance, homebuyers lacking considerable down payment may still qualify for assistance through first-time homeowner grants and loan assistance, irrespective of whether it’s their first actual home purchase. The key stipulation for various programs is that the buyers shouldn’t have owned a home in the past three years.
Stepping into the realm of homeownership as a first-time buyer can be daunting, stressful, and often muddled.
We have compiled a list of seven wise steps you can take as a first-time home buyer. These will not only improve your understanding of the buying process, but also steer you gradually toward your dream of owning your home.
BUILDING YOUR SAVINGS
There’s a typical myth about mortgage down payments – you require a whopping 20%. However, if you have not accomplished this feat, don’t worry. You should seek advice from a mortgage lender to establish a suitable down payment goal for you, which could be as low as 3%. Maximize your down payment by regularly saving or setting up automated savings and possibly slashing unnecessary costs.
KNOWING YOUR CREDIT SCORE
Generally, a credit score of 700 or more shouldn’t hamper your home purchasing effort. A higher credit score secures you attractive loan terms, saving you substantial amounts over your mortgage duration. Remember, a lower score like 500 (for an FHA loan) or 620 (for a conventional loan) may still get you a loan. Ideally, a score of 760 or more qualifies you for the lowest rates and the best terms. Ensure to monitor changes in your score and rectify any errors or credit inquiries that may bring it down.
RECEIVING QUOTES FROM LENDERS
Start by acquiring a rate quote to compare loan offers. Mortgage rates fluctuate frequently and differ significantly among lenders. Aim to receive rate quotes from at least three lenders. Generally, securing the lowest interest rate implies less expenditure every month and overall.
GETTING PRE-APPROVED
Pre-approval boosts your purchasing potential. In essence, a mortgage firm has consented to lend you a certain amount under certain conditions. The pre-approval document states how much you are eligible to borrow, which loan program you are using, and the anticipated down payment.
SELECTING A TRUSTWORTHY REAL ESTATE AGENT
It’s vital to work with an agent considering your best interest and experienced in representing buyers. Good agents understand your necessities, are thoroughly knowledgeable about real estate, and possess excellent communication skills. One effective way to find a proficient agent is recommendations from friends or family. Keep these factors in mind when interviewing an agent: their communication manner with clients, their property closure numbers in the past year, their buyer’s agency agreement terms.
SEARCHING FOR YOUR HOME
Convey your budget and crucial requirements to your agent to avoid wasting time on unsuitable listings. If practical, view homes directly; avoid a blind purchase based solely on online photos and description. During visits, assess the home and its surroundings. Investigate issues like heavy traffic, proximity to a noisy airport, or under-performing local schools.
PLACING AN OFFER ON A HOME
Upon finding your home that caters to your needs, prepare to sweep in with an offer. With your agent’s help, draft an offer letter specifying your proposal and any contingencies such as a home inspection. Your earnest deposit, typically 1%-2% of the total price, should accompany your offer. It is seen as a token of sincerity by sellers, reinforcing your serious buying intent. If sellers accept your offer, the earnest deposit joins your down payment.
SUMMARY
Venturing as a first-time home buyer entails a meticulous examination of your financial status, housing market trends, and available lending opportunities. Remember, the experience need not be stressful. With a strong understanding and correct details, you’ll become an informed buyer, and settle into your dream home sooner than later.
The above steps aim to guide you through a seamless process. We hope you find them valuable and beneficial.
