Buying your first home? Here are the basics
Congratulations on taking the plunge and deciding to buy your first home!
It’s an exciting and sometimes overwhelming process. You’ll want to make sure you do everything right so that you don’t end up with a mortgage that’s too big or a house that doesn’t fit your needs.
Buying a home is a huge step and not to be taken lightly. It’s likely the biggest purchase you’ll ever make, so it’s important to be prepared when it comes to your finances. .
If your a first time home buyer, before you sign any papers or begin shopping for homes, here are some tips to help you make smart financial moves when buying your first home.
Check Your Credit Score
Your credit score will play an essential role in getting approved for a mortgage. Its very important to check yours before applying for loans.
If you find anything inaccurate on your credit report, dispute it immediately so that it doesn’t negatively affect your score.
Also stay away from making any large purchases that could impact your score until after closing on the house. This will show potential lenders that you are responsible with managing debt and less likely to default on payments once approved for a loan.
Establish Your Budget
The most important step in buying a house is setting your budget.
Do not rely on what the bank tells you they will lend you; instead, take into account all of your monthly expenses plus the cost of owning a home (mortgage, taxes, insurance).
Remember to include costs such as maintenance and repairs as well as other fees that can add up if you’re not careful (such as closing costs).
Once you have an idea of how much house you can afford, stick to it!
Save Up for a Down Payment
One of the most difficult things about buying a house is coming up with enough money for the down payment.
Saving up for this can be challenging but is worth it! A larger down payment will lower your monthly payments and also help build equity in your home faster. Try setting aside extra money each month until you reach your goal. You may also be able to tap into retirement savings or ask family members for help if needed.
When applying for a mortgage loan, lenders usually require that you have 20% of the total cost of the home saved as a down payment for a conventional loan. Other loans such as the FHA may require 3.5% down and a RD Loan may not require a down payment at all.
It is best to look into all of your options and their requirements when deciding which loan may be right for you.
Even 3.5% down payment on a home may seem like an intimidating amount but saving up gradually over time can make it much easier. Try putting away small amounts every month in order to build up your savings quickly.
Look Into Mortgage Options & Rates
It’s important to do research on different mortgage options and rates available before making any decisions.
You will want to look at the different type of mortgage loans available and compare which program will work best for you and your situation. There are Conventional, FHA, VA and RD loans to name a few and they each have their own eligibility and requirements.
There are also many types of mortgage rate options available as well, including fixed rate mortgages, adjustable rate mortgages, and more. Compare different rates from different lenders and find out which one fits best with your needs and budget.
Buying a house is one of the biggest investments many people ever make—so it’s important to do everything right before signing any papers or signing off on any loan agreements.
Establishing a budget, saving up for a down payment, checking/monitoring credit scores, and comparing all of your options and rates are all key steps towards success when purchasing this major life milestone.
These are some basics to get your started. Read more on Freed Ambitions to look deeper into everything you’ll need to know about buying your first home!
Are you ready? Let’s go!
