If you’re getting ready to buy your first home, there are probably thousands of questions running through your mind. Questions about location, real estate services, expenses, and more—it’s a huge financial commitment and you probably want to make sure you have the best chance at getting exactly what you want.
While it can be a difficult process to navigate, there is help for first-time home buyers, from resources and advice to first-time homebuyer programs to help you finance a home.
If you’re worried you won’t ever be able to purchase a home, take a deep breath and a good look at your finances. You can start by reviewing your options and begin by starting to save for a down payment. (There are investment accounts and savings options that can help you reach your goal of buying a home, too.) Here are 12 helpful tips for first-time home buyers.
1. Knowing Your Credit Score
Your credit score is typically very influential in determining what kind of interest rate you can get on a mortgage. You can get one free credit report from each of the three major credit bureaus (TransUnion, Equifax, and Experian) once every 12 months. You can review your credit report to spotlight any errors that may be affecting what lenders are willing to offer you.
If you find any errors, you can report them and have them removed. This process can sometimes take a while, even if the mistakes are obvious, so consider starting a credit report review early on in your home-buying process.
2. Calculating What You Can Afford
Do you know how to figure out how much house you can afford? While the size of your mortgage is generally determined by an evaluation of your personal finances and debt, there are a few rules of thumb that may be relevant.
One general guideline is that an eventual mortgage should, ideally, be no more than 28% of gross monthly income.
If you are paying off student loans, credit card debt, or a car payment, you may want to adjust your budget accordingly. Some people try to keep their debt to 43% (this is just another rule of thumb and everyone’s financial goals are different) of their gross monthly income, so that they can still prioritize financial goals like saving for retirement.
And having less debt may make you more appealing to mortgage lenders. Understanding how much money you feel comfortable spending on a house can, in turn, impact the properties you consider. As you build your budget, you can also check out SoFi’s mortgage calculator.
3. Looking into First-Time Homebuyers’ Programs
While you are evaluating your options and creating your budget, it could be worth looking into some first-time homebuyers’ programs. Some programs offer down payment and closing cost assistance, or loans with reduced interest rates.
There are a variety of options available for first-time homebuyers looking for assistance. For example, the Federal Housing Administration offers a mortgage insured by the FHA. These loans often come with competitive interest rates and allow for smaller down payments.
The USDA also helps first-time home buyers with a program focused in rural areas. And the VA provides assistance to active duty military members, veterans, and surviving spouses. There are even more first-time homebuyer programs available offered by various states as well .
4. Understanding the Expenses
There are plenty of other expenses that come with purchasing a home beyond your down payment and closing costs. For example, when you’re renting property, you don’t have to worry about property tax or general maintenance. When you own property, you do.
In addition to property tax, you’ll likely also need insurance to protect your new home. And you’ll be responsible for maintaining the property, of course, which can include painting, replacing windows, updating the roof, replacing appliances, and more regular maintenance and upkeep.
You may also need to factor in additional purchases like a lawn mower or professional landscaping if the property you are looking has a yard. Will you need to buy a snowblower to clear the driveway during long winters? These are all factors that can come into consideration when figuring out the cost of your new home.
Check out our Home Affordability
Calculator to estimate how much house
you can afford.
5. Remember that Location Matters
Location is, obviously, important to many buyers. In some cases, you may have to decide if being in the neighborhood you want is more important than having extra square footage or other, similar trade-offs.
If you have kids or are planning to, you will likely be considering the school district each potential property falls in. Even if you aren’t planning to have kids, it could be worth considering the school district since it can have an impact on the value of your property and could make it easier to sell the house down the line.
6. Planning for the Future
Zoning laws and development plans are another factor to consider when house-hunting. If there is undeveloped land nearby, it can’t hurt to do some digging and see if there are any plans for development.
It may also be worth looking into the property value of other homes in the area. Have they been declining in recent years? If so, this could impact the future value of a home you’re considering.
7. Using Your Imagination
When shopping around for houses, you can take the opportunity to look at a property’s potential, as well as its current value. It’s easy to be distracted by the current owner’s décor, paint, carpet, or other factors that are easy to change or adjust. You can easily repaint or update the appliances, but you won’t be able to adjust the location, floorplan, or add on to the home as easily.
8. Reserving Cash for Home Improvements
When you’re getting ready to put a down payment on a house, it may be tempting to clean out your savings account. And while that’s completely understandable, keeping your emergency fund close at hand may be a good idea when becoming a homeowner.
After closing costs have been sorted out and you’ve moved into your new home, you might find that unexpected repairs pop up. Having a reserve stash of cash can be helpful if the roof in your new home starts leaking, or you need to replace an appliance.
9. Getting a Real Estate Agent
With all of the housing apps and free resources available on the internet, it may seem like a real estate agent is unnecessary. But in reality, navigating the housing market can be tricky and hiring a buyer’s agent up front can save you time and help make your home-buying experience easier.
While you could spend your time going to open houses and scouring real estate listings, an agent can tailor the home search so that you spend less time looking at houses that don’t meet your criteria. They also can have access to new listings that aren’t yet on the market and may be willing to “preview” homes for you. A real estate agent can also help you navigate the intricacies of contract negotiations and paperwork.
10. Knowing What to Expect from a Home Inspection
Having a home inspection completed is a critical step in buying a home. Inspection procedures vary from state to state, so it can be important to understand what is included in the home inspection in your state, since this is a great chance to truly examine the property and uncover any issues—before they become your issues.
Inspectors should have access to every part of the house including the roof and crawl spaces, and you should be able to attend the inspection yourself.
Don’t be afraid to ask the inspector questions; the more information you have, the better prepared you can be to decide if this is the right house for you.
11. Negotiating the Offer
You’ll have an opportunity to negotiate when you’re making an offer on a house. A lot of factors can influence an offer and negotiating terms in your favor could result in serious savings, especially if you are in a buyer’s market .
If you are working with a real estate agent, they can help give you a good idea of what is considered a reasonable purchase bid by providing comparable sales.
A “comparable sale” is a similar home in the same condition as the one you’re considering that has sold in the last three months. An agent can help give you an estimated price range and manage your expectations.
12. Finding the Right Mortgage
Before committing to a mortgage, it’s smart to shop around and see what various lenders are willing to offer you. A few things to consider include the interest rates, loan terms, application process (Is it lengthy? Online only?), and any hidden fees included in applying for or repaying the mortgage.
At SoFi, we offer a variety of unique mortgage options so you can make the most of your money. And you can have your financing completed quickly—most applications close within 30 days.
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The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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