Purchasing your new home is indeed a milestone in your life. It is a choice that will likely impact how you live your life for the next several years (or decades). When there is so much on the line, it can be easy to get carried away and overwhelmed by your options. That said, it is a good thing to feel hesitant when it comes to buying a new home, as rushing could very well lead to regrettable decisions in the near future.
Fortunately, when it comes to purchasing a new home, you are not alone. There are plenty of different ways to make the home buying experience a more comfortable one, as a bit of preparation goes a long way. Considering that your decision is likely not just going to impact you but the rest of your family, it undoubtedly pays to go the extra mile. Here are just a few crucial tips for those buying a home for the first time.
Starting with the finances
When it comes to the financial aspects of purchasing a new home, the first thing to consider would be the down payment. It is a percentage of the purchase price of your chosen house, which is paid upfront when you make the decision to close the home loan. It is typically the largest investment you have to make for your home, as it can end up as much as twenty per cent of the purchase price.
Fortunately, first-time buyers are typically given loans with a much lower down payment requirement - especially if you have excellent credit. There are some deals with down payment offers as little as three per cent overall. However, even three per cent of a home's purchase price can be hefty for the first-time buyer.
Dealing with the closing costs and the move-in expenses
Aside from the down payment, there is also the closing costs of the home, which are the fees you pay to finalize and close your mortgage. It can range from two to five per cent of your home's purchase price. It can also include a variety of different fees, including loan origination fees, title and homeowner's insurance, property tax and more.
There is typically no need to estimate the overall closing costs, as the lender is required to submit a Loan Estimate within a few days of your mortgage application. The expenses can vary wildly depending on the property and many of the details, so it is never a bad idea to speak with your lender about the details.
Aside from the down payment and the closing costs, there will always be the move-in expenses. Most first-time homeowners want to make upgrades or deal with furnishings right after the purchase, so it would be a good idea to set some money aside for anything you might want to do when you close the purchase.
The importance of your credit score
Put simply, the credit score will determine whether or not you end up qualifying for the mortgage you want. It will also determine the interest rate of your lender - or whether they even want to do business with you. As mentioned above, there will be some deals where you only have to pay as little as three per cent down payment, but such a thing will only apply if you have an excellent credit score.
While it might seem like an obvious tip, many people tend to forget that your credit score depends on whether or not you can pay your bills on time. Having a high credit card balance for long periods of time will undoubtedly hurt your score, which is why it is crucial to make use of best-practice methods if you intend to buy your first home.
A rule of thumb when it comes to strengthening your credit is not to close any lines of credit. Closing a card will end up lowering your score, which will hurt your chances of getting a great deal when it comes to your mortgage.
Advantages for first-timers
Aside from making sure that your credit score is as high as possible before shopping for a home, you can also take advantage of first-time homebuyer programs. Fortunately, there are plenty of different assistance programs available that can provide you with low-interest mortgages as well as assistance with your down payment.
While it might not necessarily be enough to help those with extremely low credit scores, it would still be prudent to research the aforementioned assistance programs to see if you qualify.
The right professional can make a sizable difference
There is no denying that purchasing a new home is a challenging prospect - especially if you are a first-time buyer. A lack of experience could very well lead to costly mistakes, which is why taking the time to hire a skilled real estate agent is so crucial. While you might be able to navigate through the home buying process on your own, having someone with years of experience to help you save money is never a bad idea.
If you are having trouble looking for professionals that can help, you can research recent first-time buyers to see if they had help from a real estate agent. Getting referred to a skilled professional is a great way of starting off on the right foot when it comes to buying a new home.
Do not forget home insurance!
Last but certainly not least, home insurance provides coverage if your property ends up being damaged by any incident covered by your chosen policy. While getting sufficient coverage is required by any lender, taking the time to choose quality coverage provides an extra layer of security, ensuring that you are not blindsided by unexpected expenses.
There is no denying that buying your first home can be an exhilarating and stressful process. It can also be quite confusing if you do not have too much experience in the matter. Fortunately, first-time homebuyer programs and real estate agents can help make up for the lack of experience, ensuring that you purchase the best possible house for you and your family.