13 Tips For First-Time Home Buyers.

Homeownership is becoming increasingly attractive, with rent prices skyrocketing and DIY Tik Tok content constantly trending. The housing market has been a trendy topic since rates dropped just as low as 2.5% in 2020, to quickly jumping to 6% in late 2022. Regardless of the buzz, home buying is an important life milestone and should not be taken lightly. Your focus should be on building generational wealth or creating an investment to sell when you retire.

Take a look at the following steps to help you decide if you're ready for homeownership. 

1. You're Ready To Commit To A Loan

The main tip is to begin preparing your finances as soon as you set your home goals. The average mortgage loan term is 15 – 30 years. Although this doesn't mean you need to stay in your home for that long, buying a house is still a major commitment; be 100% sure you're ready to buy before taking on a mortgage.

Start with these questions:

• Am I willing to live in this home and city for at least 5 years?

• Do I have an emergency fund that can help cover at least 3 months of expenses?

• Do I have a stable job with a regular income?

If you answer "no" to any of these questions, we need to discuss how you can continue saving, researching, and checking some of these goals off your list. 

2. You're Ready To Get The Pre-approval

It can be captivating to dive right into hunting for the perfect house, especially if this is your first time – or if you're rushing to move out of your current home. However, getting a mortgage pre-approval before you begin comparing properties is a really good idea. What is a pre-approval letter? 

• Pre-approval letter: A mortgage pre-approval is an official document from a lender that tells you exactly how much you can borrow based on your financial information, such as W-2s, bank statements, and credit score.

Benefits Of Pre-approval

Some of the benefits of getting preapproved include the following:

• You know exactly how much home you can afford. You and I, your Realtor®, know your purchasing power once you have a pre-approval letter. The letter will help us narrow down the options. 

• You can make a stronger offer. Sellers need to know that the buyer they choose can afford their home. A pre-approval shows a seller that you have verified your finances and can purchase the home.

• You'll experience fewer surprises. When you're preapproved, you're less likely to run into last-minute surprises or delays with your mortgage lender. However, it is important not to make significant changes to the information you used for the pre-approval during the buying process. 

The bottom line? Please don't skip this step; whether you chat with one of my trusted financial advisors or yours, get the pre-approval first! 

3. Maintain Your Credit

Avoid opening a new line of credit, like a credit card or a personal loan. When you apply for a home and get a pre-approval, lenders will pull your credit report. They'll do it again before you close on the house and get the final loan commitment.

If, during this time, you've taken out another loan or line of credit, your credit balance has increased, or you've started to make late payments, it could risk your final approval.

It is important to continue paying your bills on time. Don't attempt to influence your credit rating for better or worse or begin risky spending. Lenders want to see that your financial decisions are healthy and balanced. 

4. Save For A Down Payment

There are tons of programs out there designed to help with down payment assistance. Your loan officer will be able to see if you would qualify for any. 

A common misconception is that you need 20% down to buy a home; an upside to having 20% down is that you can avoid private mortgage insurance (PMI); however, it's probably not necessary to purchase your home. 

Don't let the down payment be the reason you shut yourself off from homeownership. There are options worth exploring:

If you qualify as a first-time home buyer, you can benefit from several assistance programs, including down payment assistance loans and grants.

5. Understand Your Loan Options

There are multiple types of mortgage loans? The type of loan you choose will determine your down payment amount, the type of home you can buy, and more. Here are some of the more familiar types:

• Conventional loans: Conventional loans are the most common type of home loans. 

• FHA loans: An FHA loan can allow you to buy a home with less strict financial and credit score requirements. 

• USDA loans: USDA loans are for buyers looking to buy a home in a qualified rural or suburban area. 

• VA loans: VA loans are exclusively for veterans and members of the armed forces, National Guard, and qualified spouses. 

Each type of loan has qualification requirements that you must meet. 

6. Don't Forget Closing Costs

Your down payment is not all that you'll need to close on your new home. You'll also need to cover closing costs before you take control of your property.

Closing costs are upfront expenses like loan origination fees, discount points, prepaid expenses, etc. 

You'll see a breakdown of the closing costs on a document called a Closing Disclosure. Generally, you can expect to pay 2 – 5% of your total loan amount in closing costs.

If you're a first-time buyer, you may qualify for government-backed grants or loans that can assist with closing costs. Additionally, asking the seller to help cover closing costs is fairly common. 

7. List Your Needs, Non-negotiables And Nice-To-Haves

Your reason for buying a home will be your north star for forming conclusions about your purchase. 

The best way to know what you're looking for is to write down and create a list of qualities you want and need in your new home. This will help you make home shopping more effective and less stressful when comparing properties.

8. Work With A Real Estate Agent

Work with a REALTOR® to find the perfect property. REALTORS® are local professionals who are experts in the home buying process and your local market.

A Realtor® can help by:

• Show you properties that fit your needs and price range

• Attending showings with you to help you learn more about the home and the buying process

• Helping you decide how much to offer for a property 

• Helping you create the offer and submitting the documents on your behalf

• Helping you negotiate with the seller or the seller's agent after you submit an offer

• Guiding you through the purchase from beginning to close

Remember that a buyer's agent will work for your best interest. Refrain from relying on the seller's agent to represent your behalf. Work with an experienced agent, and don't hesitate to ask all the questions you need.

9. Be Confident When You Submit An Offer

An offer is a legally binding contract. You should never submit an offer on a home unless you're 100% committed to the purchase – or you could risk giving up your earnest money deposit, also known as a "good faith deposit." the earnest money signals to the owner that you're serious about the offer.

The deposit is typically equal to 1 – 3% of your total home price and is usually credited to the amount you bring to closing. If you get cold feet, the seller could choose to keep the earnest money. 

10. Hire An Inspector

You'll want to hire a professional home inspector during the inspection contingency of your new home; this period is negotiated in the offer and usually 7-10 business days. An inspection is different from the appraisal required by your lender. Here's how:

• The appraisal: During an appraisal, the appraiser gives you and your lender a detailed report of how much your home is worth based on comparable properties (comps).

• The inspection: During a home inspection, the inspector's job is to find specific problems with the property. You can use the results of your inspection to negotiate repairs or seller concessions; a home inspection usually helps you determine if you can move forward with purchasing your new home. 

11. Stick To Your Budget

Your desire to purchase a home is likely guided by emotion. You should feel financially secure; homeownership should not be a monthly financial burden. 

Many home buyers get emotionally invested and try to exceed their max borrowing amount. Stay within your budget for a house, even if the house seems perfect for you. Be sure you can afford to have an emergency repair fund. The right home is out there for you, so search until you find a home that fits your budget and satisfies your must-haves.

12. Save Hard Copies Of Your Paperwork

Once you get moving on a house purchase, remember the paperwork. Yes, cloud-based storage is the obvious choice for keeping tabs on documents, but you should keep a physical copy of all the real estate documents you acquire throughout the process. 

Keep them stored away in a safe location! 

13. Continue Learning

Real estate is a fun topic that can help you build generational wealth and wealth in general! Don't stop learning.

A good starting point would be my home buying workshops or all things real estate seminars, which can help you:

• Determine if you're ready for homeownership

• Keep track and budget your finances

• Speak with one of my preferred lenders to chat about affordability based on your finances

• Chat with different lenders and shop deals if needed 

There are so many loan programs available to qualifying buyers. Work with a lender to explore programs that may offer financial perks, such as low down payments and closing-cost assistance.

The Bottom Line: Schedule a consultation with me to start the process correctly!

Buying a home, whether for the first time or from a long time ago, doesn't have to be overwhelming. Wherever you land, you and your loved ones make a home special. Continue working on your finances to widen your chances for good loan programs.