Buying a home is probably one of the biggest purchases of your life and it can be very nerve wracking as a first time home buyer. We recently just bought our first home (yay!) and I wanted to share our experiences and tips as we went through the process.
TIP #1. Have good credit! Make sure you’re not delinquent on any of your credit and try to get in good standing before talking to a lender. It will make the process a lot easier! You can get your credit report for free once a year!
TIP #2. During the home searching and buying process, do NOT change jobs, make big purchases, use your credit card excessively, co-sign on any loans, or change bank accounts. Essentially, do not make any big changes to your life because it will be under a microscope by your lender!
TIP #3. Get pre-approved. Shop around for lenders – make them work for your business and let them know you are shopping around! Different lenders offer different incentives and different types of loans programs. Make sure you go with a lender that is going to be able to offer you a loan that is best for you. And don’t forget to talk about interest rates! Rates vary between lenders as well.
Tip #4. Find a real estate agent that you can communicate well with. They have to be able to understand your wants and needs. Our realtor was very detail oriented and was not afraid to step up to the plate when people were slacking at their jobs! It was so helpful to have someone to be our advocate through every step.
TIP #5. Get your down payment ready. Usually people put down between 3% – 20% of the cost of the house. If you pay less than 20%, you will have to pay PMI (private mortgage insurance). PMI is usually about 1% of the original loan amount per year. Don’t worry though, that will go away once you hit 20% through your mortgage payments. Also, if the housing market is growing, you can refinance or get a new appraisal and the equity gained can be taken into account and eliminate the PMI.
TIP #6. Look into down payment assistance programs. These programs vary from state to state and all have different requirements. Some of these programs are First time home buyers programs, FHA, Pathway to Purchase, Homes for Heroes, USDA loans, ect. We didn’t qualify for any of these programs but if you do they can help a lot!
TIP #7. Do NOT buy what you qualify for; buy what fits your monthly budget. Experts say to stick to a mortgage that is 25% or less of your monthly income. You will most likely prequalify for much more than that and a more expensive, bigger, and nicer house is a very attractive option. Even “fixed” mortgage rates can increase. For example, property taxes are usually paid through an escrow account attached to your mortgage loan. As home values increase, so do property taxes. You also want to have extra cash flow for emergencies or repairs.
TIP #8. Save some money for remodeling or updating. Especially if it is your first home, it most likely won’t be perfect! Some tweaks may just be a new kitchen table that fits the space but you may need to do bigger changes like painting walls or updating countertops. Everything adds up fast! Even new builds still have extra costs once you move in… yards usually are just dirt and you will need blinds, paint, ceiling fans, appliances, and more.
TIP #9. Get a good home inspector with references. After you put an offer in on a home, it’s SO important to find someone that will give you a thorough report that includes pictures. And make sure if you live somewhere there are termites that termite inspection is part of your home inspection. (Arizona is a termite state!)
TIP #10. Make sure you save for closing costs! Closing costs are fees that are not included in the price of the property you are buying. Closing costs can sometimes be the same amount as your down payment. People usually pay about 4% of the original loan in closing cost fees. If the market is competitive enough, try to ask the seller to cover all or some of your closing costs.
Other important things to consider:
- How old are the appliances?
- What school district are you in?
- What will your commute be like? Are you close to freeways?
- Do you have an HOA? What are the rules? What are the monthly and yearly costs?
- What is the location? You can fix the house but you can’t pick it up and move it.
- What is the neighborhood like? Is it in good condition? Run a crime report.
- What are the neighbors like? Talk to them if you can.
- What type of closing time frame did your lender give you? Closing usually takes about a month for all the documents to go through.
- Ignore thing that are cosmetic to an extent, like paint and tile. All those can be changed later.
- Focus on layout and structure; that can be really expensive to change later. Watch out for signs of damage or repair.
- What are the property taxes going to be like?
- Once you put an offer in on a house, check your email constantly! If you miss deadlines to turn in documents to your loan officer, it can push back the closing date.
- Stop using Zillow. It’s not accurate.
- Most importantly, don’t forget to have fun!
What are your home buying tips and experiences? Comment below!