Buying a home is a considerable investment and a significant milestone towards achieving the American dream. Recently, real estate investing has been high thanks to the low mortgage rates, which are enticing many new players into the market. 

A Great Guide for First-Time Homebuyers

Although it is purported that there is a recession right around the corner as an economic effect of the pandemic, you need not worry or rush through the process. Even though lenders are expected to set very low interest rates to recover, it looks like the housing market will hardly be affected.

For a first-time home homebuyer, the process is not a walk in the park. It is complicated by many steps, requirements, tasks, and anxiety about making a costly mistake. Below is a rundown of tips that will ensure you enjoy the process of buying your first home.

Know the Market

Now that you have decided it’s time to buy a home take your time to research what you can afford, which type of home best suits your needs, and what special features you desire to have in your ideal home. The National Association of Realtors reported that 50% of new home buyers found the home they purchased online. You can do the same, and when you find one you like, share it with your real estate agent to give them a clear picture of what you want.

As you do your search, have the following factors in mind

  • Home Expenses – Apart from how much you can afford in a home, affordability also considers maintenance and utility expenses, upfront costs, and ongoing ownership costs.
  • Neighborhood – Feeling at home in your new home has a lot to do with the community. Make sure you can fit into a neighborhood before moving there.
  • Amenities – Look for easy access to public transport, desirable school districts, playground and parks, community centers, pools, and sports fields.
  • Personalization – Look at how you can turn your new home into a reflection of you; by touring new constructions, you can educate yourself on what to look for in homes.
  • New versus Used – Once you know what you want, it is time to consider whether you want to purchase a new or used home.

Check Your Credit Score 

Your credit score informs lenders of your creditworthiness by telling them whether they can rely on you to make mortgage payments while managing current debt. Your credit history determines your credit score, and so does your total amount of debt, the number of open accounts, repayment history, and types of loans. The number ranges between 300 and 850. A higher score makes you look better to potential lenders and gets you better mortgage rates.

When information on your credit is updated, it can rise or fall depending on the new information. Here are a few ways to improve your credit score to help you save thousands in mortgage payments.

  • Clear any credit report errors.
  • Pay your bills on time for at least six months to make a difference on your score.
  • Avoid closing unused credit accounts as doing so can lower your credit score.
  • Pay off low balances and if possible consolidated credit card debts.
  • Spend less than 30% of your credit.
  • Keep a low credit profile by not applying for new lines of credit.

Get Preapproved for a Mortgage

While getting preapproved for a mortgage doesn’t mean you will get it, it shows that you have been approved for financing and assures the seller that you can pay for the home. Preapproval is an excellent way for first-time homebuyers to move up in the competitive real estate market.

As a first-time homebuyer, you have various options and programs to help you get your first home. Most of the programs offer minimum down payments that are as low as 3% instead of the standard 20%. Some off these popular programs include

  • First-time homebuyer educational programs vary from state to state and educate potential buyers on the kind of mortgages they qualify.
  • Federal Housing Administration (FHA) loans help those with weak credit scores to get new homes with as little as 3-5 percent.
  • U.S Department of Veteran Affairs offers no down payment home loans to veterans and surviving spouses.
  • State programs offer closing cost and down payment assistance to first-time home buyers.

Other people also opt for Private Mortgage Insurance (PMI), which lenders require when you cannot raise the traditional 20% down payment. Why is it desirable?

  • It can help you qualify for a loan you would otherwise not qualify for.
  • It makes the lender overlook your low credit score.
  • It gives you more purchasing power, especially when you are low on funds.

The PMI’s major drawback is that it is meant to protect the lender if you default on repaying the loan. It also increases your monthly mortgage payments, and in some cases, the closing costs too.

Hire a Good Realtor

When you are just starting on real estate investing, going in alone is a terrible idea as you barely know what is expected of you and what you should expect. A good realtor will not only help you locate a home that is in your price range and meets your needs, but they also will accompany you to view these homes. An example of a great realtor is The Kay-Grant Group, which specializes in the Greater Phoenix/Scottsdale area. 

During the entire process, these professionals are with you and will assist you in making a fair offer, shop for the best loans, and help you complete all the paperwork correctly. Your real estate agent will also help you navigate any problems you experience during the process.

Schedule for an Inspection

Even though the home you are about to purchase appears to be perfect, you cannot compromise on the need to have an expert do a home inspection of the property. The inspection should look into the safety, quality, and overall condition of the new home, pointing out any water and electrical concerns, mold, cracked foundation, and damaged roof. You can talk to the seller to make the repairs or negotiate for a discount on the selling price.

Set a Realistic Budget

As you take out your first mortgage, do not forget that there is more to pay for than the mortgage. To navigate everything smoothly, you will need to know how much you make every year or month and allocate your expenses. It would help if you kept in mind property taxes, closing costs, utilities, and homeowner’s insurance. Also, leave enough for saving and set aside an emergency fund to cushion you from the unexpected expenses that come with homeownership.

Congratulations! You Can Close

If you follow this guide, then you are ready to sign on the dotted line and move into your first home. Remember that the more you learn about the process beforehand, the less complicated and stressful it will be, and the higher your chances of getting your dream home at a price you can afford.