5 Tips for First-Time Home Buyers
Preparing to purchase can be exciting and exceedingly daunting all at the same time depending on the market you are hoping to purchase in. When you become a home buyer, you want to ensure that everything is in order to make the process as smooth as possible. Check out the tips below as you tread into the wonderful world of home ownership.
Get Documents Ready for your Lender to Pre-Approve You
When you consider starting the process to purchase a home, you need to get a pre-approval letter from a mortgage lender. In order to secure this letter, a lender needs to have documents like bank statements, identification, and other essential documents to see the type and amount of a loan that you can qualify for. This will help them determine what the price point of your home should be when beginning to look at potential properties. As a best practice, you should always have pre-approval before looking at homes in case you want to put in an offer.
Down Payment Amount
Consider how much money you have saved up to apply toward a down payment on your home. A down payment will help to lower your monthly payment because you are putting more money towards the house upfront that you don’t have to get a loan for. Normally, the rule of thumb amount for a down payment is at least 20% of the purchase price. But, being a first-time home buyer, there may be loan products that can require a lesser percentage of the purchase price for the down payment.
Shape Up your Credit Score
As a first-time home buyer, to ensure you get the best interest rate on any mortgage loan, ensure that your credit score is in tip-top shape. The higher your score, the more likely it is that the lender will not have to add to the interest rate because of the amount of risk they are taking in giving you the loan. Paying off high balance credit cards and making payments on-time always help you raise your credit score.
Research Mortgage Options
As a first-time home buyer, you have many options to choose from when it comes to loan products. There is a Federal Housing Administration loan that allows borrowers to qualify with as little as a 3.5% down payment and a credit score of 580 or higher. There are also specialized loan products for veterans (VA loans) and teachers. There are USDA loans for rural properties. Depending on the type of home and the area, you need to employ the help of your lender in finding the right loan product for you.
Be Ready to Compromise
Once you are pre-approved and ready to start looking at potential homes, you may think you know everything that you want to find in a home. However, as a first-time home buyer, you may have to compromise and only get a portion of the amenities or specific things you want in a home. Keep in mind that this is your first home, but it doesn’t have to be your forever home. You can make this home your own and personalize it regardless of if it has everything you want on your list.