Approximately 75% of Americans list buying a home as a priority, according to a NerdWallet study. And, despite the barriers to homeownership, about 15% have made that purchase a reality within the past five years. How about you? Are you ready to make your dream of homeownership a reality, but you’re also afraid of making a wrong decision? You’re not alone. Follow these first-time homebuyers’ tips to avoid any pitfalls.
Plan Early
You should have a game plan before you make any large purchase. In addition to understanding the mortgage process, you should understand how much house you need and which neighborhood you wish to buy in. And, that’s not all — you should understand how much house you can realistically afford. Additionally, you should know all about the pricing trends in your selected neighborhood. Buying the right amount of house in a great area with rising home values will go a long way toward preventing buyer’s remorse.
Meet Qualifications
The time to see if you qualify for a mortgage is before you begin shopping for a new home. Pull a copy of your credit report and see how it lines up with current mortgage qualification criteria. How does your credit score measure up? Do you have low debts and obligations? Do you have any accounts in collections? It’s important to take care of all these issues before you begin looking at houses. You may also want to think about getting pre-approved through a mortgage lender.
Use Programs and Grants
Don’t leave money lying on the table. Take advantage of any grant or government programs that you may qualify for, such as the FHA, USDA or VA loan programs. In many cases, these programs can help you with your down payment and closing costs. They may also limit the amount of interest you’ll have to pay. Talk to your mortgage lender to see which programs you qualify for.
Put Money Down
Even when taking advantage of programs to reduce or eliminate the amount of money you have to put down on a home, it’s almost always a good idea to put money down anyway. Why? A down payment reduces the amount of money you owe on your home, which will greatly reduce your monthly payment as well as the total interest you’ll pay. Putting at least 20% down will also eliminate the need to pay for mortgage insurance each month.
Plan for the Future
Whenever you take out a mortgage, you should do so with the future in mind. Don’t spread your finances too thin. You should have enough money left over to set aside for repairs. Keep in mind that it takes 30 years to pay off a traditional mortgage. A lot of things can happen during that time. Disability or job loss could drastically reduce your income. Make sure you’ll be able to keep your home regardless of what life throws at you.
Buying your first home can be challenging, and there are quite a few potential pitfalls that could mar your experience. With a little prep work and savvy, however, you can successfully navigate the homebuying process and make your dreams of owning a home come true.
~Here’s to Your Success!
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