Buying Your First House: Tips for Buyers

Buying Your First House: Tips For Buyers

When taking on any new project, the more you know and understand, the better things are likely to go. The same is true when buying a home for the first time. With our first-time buyer tips, you should be able to avoid many of the problems that can prevent your purchase from going well.

Let’s take a look at some of the key things to consider before you jump into the real estate market and buy your first house.

Getting Prepared
One of the most important tips for first-time homebuyers is to make sure you can afford to buy. Renting an apartment is a lot different than owning a home. With homeownership comes another level of financial responsibility. The need to have your financial house in order well in advance of putting up the deposit for your house is essential.

Down Payment
You need to have money saved for your down payment. The amount you need will depend on the lender and the type of loan you choose. Lenders prefer you to have a down payment of 20 percent, but you can get away with just 3 percent of the purchase price if you have good credit. However, even 3 percent is going to be thousands of dollars for an average priced home.

Closing Costs
There are many fees to pay when buying a home. Many of these will need to be paid at closing. You should budget for somewhere between 2 percent and 5 percent of the mortgage amount. Sometimes sellers are willing to help with closing costs to make things easier for the buyer.

Moving In
The costs don’t end once you’ve bought the home; you still need to pay to move in. This will entail hiring a moving company or, if you are so inclined, you can do the move yourself. There could also be other costs like repairs soon after you’ve moved in.

Improving Your Credit
A lot hinges on your credit score as it determines the mortgage you will be offered and the interest rate you will have to pay for the loan. There are a few things you should do before applying for a mortgage to help.

Check your credit reports and fix any mistakes. Errors could be adversely affecting your score, contact the appropriate bureau to remove the problem. Make sure to pay bills on time, and don’t close any accounts or apply for new ones before closing on your home.

Choosing a Mortgage
There are a few different types of mortgages to choose from. They offer a variety of advantages for first-time buyers, from lower down payments to no down payments at all.

Conventional Loans
Government programs don’t back conventional mortgages, but there can still be good offers for first-time purchasers. You should be able to find mortgages with down payment requirements as low as 3 percent.

The Federal Housing Administration (FHA) backs the FHA loans program. Their best down payment offer requires 3.5 percent of the purchase price to be provided by buyers. FHA mortgage programs are one of the most popular among first-time homebuyers. There are numerous benefits to FHA loans.

If you are a veteran or currently serving, the VA loans program offers great terms. They allow you to buy without any money down and have lower fees as well. When you have served your country, the VA mortgage program is one of the best for first-time homebuyers.

The Department of Agriculture offers rural homebuyers the chance of buying without a down payment as well. If you live in an area where the population is under 30K people, you might want to explore a USDA loan.

First-Time Buyer Assistance
There might be more help from your state or local government if you are a first-time buyer. There could be low-interest mortgages, as well as help with down payments and closing costs. Check on your city and county government websites to see what is available.

Comparing Loans
To make sure you get the best mortgage for you, compare mortgages from different lenders. They will have different fees and interest rates that could make a considerable difference to the amount you have to pay over the course of the loan. Some lenders might offer the chance to reduce your interest through buying discount points, and all of this needs to be compared.

When you are happy with what a lender is offering, you need to get pre-approval. A pre-approval letter will show real estate agents that you are a serious buyer who can get the loan needed, which could give you an advantage over other buyers.

When you get pre-approved, you’ll really find out how much you can afford to spend on a home. They will look at your income and expenses to discover the maximum they’re willing to loan to you.

Finding Your New Home
The first step when starting your search is to choose your real estate agent. They will be working on your side through all stages of the home-buying process, so you need to have trust in them. It would be best if you tried to get referrals from people you know, and then contact the agents to see how they can help you as a first-time buyer.

Choosing Your Neighbors
Deciding which neighborhood to live in will make a lot of difference to your experience of living in your new home. Check out the area you want to move to so that you know it is the sort of place you’ll be happy in. Visit at different times of the day to make sure and check the available amenities in the area.

When you know the area you want to move to, your real estate agent can help you find the home you want. Choose a type of home that meets your lifestyle needs as well as your budget. A home in need of renovation will be cheaper, but you will need the budget to make the necessary improvements. Lots of first-time buyers underestimate the costs associated with fixer-upper homes.

Buying Your First Home Tips
Once you have found the right home for you and had an offer accepted by the seller, you need to do a few more things before the property is yours.

Home Inspections
A home inspection is advisable to make sure there aren’t problems that could make you regret your decision. The inspector will thoroughly check the main elements of the home to assess the condition. This will give you a better understanding of what you are hoping to buy and alert you to any problems with it. Understanding how a home inspection works is crucial for a first-time homebuyer.

You can attend the inspection if you want. This allows you to ask questions to learn about the home’s issues and how serious they are.

If the home inspection uncovers any required repairs, you can negotiate with the seller to have them fixed. If they don’t want to do that, you can ask to reduce the home price to cover your future repair needs.

If you are struggling to save enough money to pay for both the down payment and the closing costs, you can ask the seller to contribute to your closing expenses. If they do help you, so that you can continue with the purchase, you need to be aware of any rules your lender may have about the amount they can contribute.

In any negotiations you have with the seller, you will be in a stronger position if there are fewer buyers in the local market. When there is a lot of competition for homes, with multiple buyers vying for each house, you will have a difficult time getting concessions from the seller.

When the market is hot, you may find the seller won’t negotiate at all. You’ll end up having to decide if you really want the house or not. In some instances, when there are significant problems, it may be better just to walk away and get your earnest money back.

Home Insurance
Another thing you will need to pay for is home insurance. This will be required by the lender to make sure the costs of rebuilding the home are covered should the worst happen. First-time homebuyers should have a firm understanding of the basics of home insurance.

Final Thoughts on Buying Your First House
Buying a home for the first time is an awesome feeling. You have entered the next stage of your life with a lot more responsibility. Nobody ever said homeownership was easy. It will be up to you to make the most of it.

Hopefully, you have found these first-time homebuyer tips to be useful. Best of luck with your purchase!

Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 33 years. He has been one of the top RE/MAX REALTORS® in New England for the past decade. In 2018, he was the No. 1 RE/MAX real estate agent in Massachusetts.

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