Congrats! You are thinking about buying your first home. While we know the process can seem a bit overwhelming, there are some steps that you can take to become more prepared.
Strengthen Your Credit
If you have not looked at your credit report recently, prior to buying your first home would be an excellent time to get familiar with it. You will especially want to look into any bad debt that can be repaired. Your credit score is a crucial component in qualifying for a mortgage as well as the interest rate that you will receive from lenders. Also keep in mind while working with lenders, it is important to limit the number of hard inquiries on your report, as this will affect your credit score.
Review Your Finances
Buying a home is a major commitment, and you will want to make sure that you have saved appropriately. There are three main costs to be prepared for when buying a home: down payment, closing costs, and move-in expenses.
Your down payment cost will vary depending on the type of mortgage loan you choose. There are some loans that are directed at first-time home buyers with excellent credit that allow for just 3% down. Try a down payment calculator, like this one from Nerd Wallet, to determine what your monthly payment might look like based on the size of your down payment.
Closing costs can add up quickly if you are not prepared for them. To translate, closing costs are the fees and expenses you pay when you close on a home, typically 3-5% of the loan amount. These costs include title insurance, loan origination fees, homeowner’s insurance, and more. This calculator from Bank of America might help to estimate your total closing expenses. Depending on the market, it is not uncommon to ask the seller to pay a part or all the closing costs.
Move-in expenses can catch you off guard if you drain all your income on a down payment and closing costs. Moving supplies, movers, immediate repairs, and furniture are just some of the costs you might need to prepare for immediately after closing.
Obtain A Preapproval Letter
A preapproval letter is a document from a lender declaring the exact amount of your loan. This not only guides you into looking at homes within your price budget, but it signals to the seller that you are serious about the home buying process. Furthermore, it can help you and your agent make a stronger offer when you are ready to submit.
Narrow Down Your Neighborhood
It is not necessary to know the exact location of your new home before you start the home buying process. Exploring the things you prioritize in your neighborhood will help you narrow down your search. Look into the schools and shopping in the area, what your commute to work might look like, the cost of Homeowner’s Association fees, and the condition of the surrounding homes, just to name a few.
Research Mortgage Options
There are many types of mortgage loans, with some that target first-time home buyers. Here are some of the major loans available:
FHA: FHA loans are insured by the government and have less strict credit score requirements. Some FHA loans are available with 3.5% down and a credit score as low as 580.
VA: These loans are reserved for veterans as well as current members of the armed forces and their spouses. If you qualify for this loan, you could be eligible for 0% down.
Conventional: Some conventional loans that are targeted at first-time home buyers allow for just 3% down.
This is not a conclusive list. If you are still unsure, a good lender should be able to assist with the best rates.
Choose A Quality Real Estate Agent
One of the most important steps in buying your first home is choosing a real estate agent. A quality agent will represent your interests above everything else and effectively communicate based on your needs. Katz Group LA are experts in the home buying process and have guided many first-time home buyers through the purchase of their homes. Many of our past clients have left five-star reviews about their experience working with us if you are in the process of looking for your agent.
For a more comprehensive list of tips, check out our buyer’s guide.