Countless individuals dream of owning a home. They want to put roots down in a property they own while building equity. First-time home buyers have some advantages over other individuals. They may be able to obtain a no-down payment loan or receive favorable terms on a conventional mortgage. However, a person must know how to navigate home-buying to avoid common mistakes.
Is Now the Time to Buy?
Many people contact a loan officer to determine whether now is the time to buy a home. Before doing so, they should evaluate their financial situation to decide whether or not they have the funds to purchase a home. In addition to ensuring they can afford the monthly mortgage payment, they must also be able to afford the down payment, homeowners insurance, property taxes, and repairs. Experts say housing costs should not exceed 28% of the borrower’s gross monthly income.
Where to Buy
Once people know how much home they can afford, they must decide where to buy. Many factors play a role in the location of the new house. Individuals must consider their commute time to their jobs, neighborhood schools if they have children, and proximity to desired amenities. They also need to consider the size of the property and its maintenance requirements. This home should allow them to live their chosen lifestyle easily.
Mortgage Options
Once people know where they would like to live, they must decide which type of mortgage loan they should get. Conventional loans are typically for 10, 15, or 30 years, and the borrower may choose between a fixed and adjustable rate. Each has benefits that should be considered. Most lenders require a minimum credit score of 620 and a down payment of at least 3%. VA loans are an option for those who have served in the military. First-time home buyers should learn about their borrowing options, and specialty loans are associated with certain types of properties, such as USDA loans for rural properties. Work with a mortgage lender to determine which option best meets the borrower’s needs.
Shop Around for a Mortgage
While speaking with a mortgage lender to learn about the different loan options is beneficial, a person should always get quotes from multiple lenders before choosing one that meets their needs. People may hesitate to do so because they worry that multiple inquiries will harm their credit score. Credit bureaus understand this and count multiple quotes provided within a specified period as one credit inquiry.
Pre-Approval
Once a mortgage lender has been selected, the buyer should get pre-approved for a loan. This preapproval shows sellers that the buyer is serious about obtaining the property. Multiple documents are needed during the pre-approval process, so the borrower should gather these documents before starting the process. Borrowers should recognize that the pre-approval amount is the maximum amount they can borrow. However, they do not have to borrow that much if they wish to keep their monthly payments more affordable and have more wiggle room for other ownership costs.
Once these steps have been taken, it is time to find a real estate agent to help the borrower find the perfect home for their needs. The agent will help them find the ideal property, make an offer, and complete the steps needed to finalize the loan. These steps may include a home inspection and appraisal, among other things. The agent remains by their side as these steps are taken through closing. With their help, a home buyer can successfully purchase a new home they love.
