5 Things First-Time
Homebuyers Should Know
By
Rosa Linda Fallon
Buying your first home is an exciting process but it can
also be pretty daunting one, especially if you don’t know where to start. There is a ton of information and paperwork
involved in the process.
Since buying a home is one of the most important financial
decisions you will ever make, seeking out proper guidance from a knowledgeable
real estate professional will save you plenty of time and confusion in the long
run.
As real estate agent in North Carolina, I love helping
first-time homebuyers because I have the opportunity to educate and guide them
through this new journey in their lives.
The question I am most often asked by first-time homebuyers is, “What
should I know?” or “What should I prepare for?” I’ve compiled a list of five things all first-time
homebuyers should know before they get started with their home search.
1.Know how much you can
afford.
Prequalification
Before you even start searching for your dream
home, make sure you are prequalified first. Prequalification gives you an idea
of the maximum loan amount you can afford.
It is based on consumer data you submit to a lender which will provide
an accurate estimate of how much you can borrow. You don’t want to start looking at houses,
fall in love with one, and realize it’s completely out of your price range!
Ouch!
Preapproval
The next step is the preapproval process
which is slightly more involved. This is
where the paperwork comes in! In order to be preapproved, you must complete a
mortgage application and supply the lender with all the required documentation
to perform a proper background check on your financial and credit history.
2. Make sure your credit score
is good.
Your credit score will be one of
the key factors considered when applying for a mortgage loan therefore you
should know where your score stands. It can have a huge impact on the interest
rate you pay.
Make sure you are keeping tabs on
any changes regarding your credit score so nothing takes you by surprise when
you are ready to get preapproved for a mortgage loan. Typically, the average acceptable score is
between 620-700. It is a good idea to
check all three of your credit scores before applying for a mortgage. Additionally, consider paying off as much
debt as you can before applying.
3. Yes, you can own a home
without 20% down.
While 20% down is usually the
standard and is recommended, you do not need to have 20% of the purchase price
to become a homeowner.
Keep in mind if you put down less
than 20% you will have to pay PMI (private mortgage insurance), which is $50 to
$200 a month. Once you reach a certain threshold on your loan to value ratio,
you can cancel the private mortgage insurance.
With that being said, I usually recommend to my clients to save up as
much as they can for a down payment because the more you can put down, the
better. This allows for a lower monthly payment.
4. Have everything inspected.
Having a home inspection done once
you are under contract is one of the most important steps of the process. Why?
Because it places more negotiating power in the buyer’s hands.
As a first-time homebuyer, you
want to know what it is you are buying. There can be underlying problems with
the home not readily visible, and having an inspection done can save you a lot
of time and money in the long run. If the home you really want is in the higher
end of your price range, certain information provided by the inspection may
even give you more negotiating power to talk down the price.
5. Homeownership is a great
opportunity and responsibility.
Owning a home is considered the ultimate
American Dream. Buying your first home can set you on the path to financial
freedom and personal wealth, and let’s be honest—it feels amazing to have your
own place! Keep in mind that with this
great opportunity also comes great responsibility since your home is also your
investment.
If you are a
first-time homebuyer, you may be used to the landlord sending someone out to
fix your broken AC system or replace your refrigerator. As a homeowner, this is now your
responsibility. Anything that goes wrong
in the house is up to you to fix, so it is important you financially prepare
for this.
A well-known
tip is to save 1% of the home’s value every year. Many financial advisors have also recommended
setting aside three months’ worth of mortgage payments for emergency repairs.
Whichever option works best for you it is important to be prepared to take care
of your investment.
In conclusion,
homeownership is an exciting opportunity and can help you create a great life
for you and your family.
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