Real Estate Tips for First-Time Home Buyers

Buying real estate for the first time can be an exciting yet overwhelming experience. Mortgages, property tax, assessments, and inspections can be confusing. In addition, purchasing a home is an expensive investment. Keep reading for some excellent advice for first-time home buyers.

Ready for a Mortgage?

It is essential to understand what is involved in taking out a mortgage. The average mortgage term is 15-30 years. New homeowners should be sure they are ready to commit to a home for at least five years. They should also ensure they have at least three months of expenses saved in case of emergency. They should also have a stable income that can easily cover the cost of the monthly mortgage payment. If upcoming events could change location, income, or expenses, potential home buyers may want to wait on buying.

Get Preapproved

It’s always a good idea for homebuyers, especially first-time homebuyers, to get preapproval for a mortgage before looking at homes. Prequalification is an estimate of a home loan that someone can get. It is based on an informal evaluation of income and other provided information. A mortgage preapproval letter is an official document from a lender that tells exactly how much loan money that lender is willing to give a buyer. It is based on specific financial information, such as bank statements, credit scores, and W-2s that the client provides the lender.

Down Payment

First-time homebuyers can often qualify for an FHA loan (Federal Housing Administration) that reduces the amount of the downpayment required. However, buyers need to know that if they don’t put at least 20% down on a home, they will have to pay private mortgage insurance, which is another added cost.

Different Mortgages

Conventional loans are the most common type of home loan. Buyers can buy a house with as little as 3% down. FHA loans have less strict financial and credit score requirements. They only require 3.5% down. USDA loans are for buyers who purchase in specific rural or suburban areas. With income restrictions, they can get a loan with 0% down. VA loans are loans for veterans and members of the armed forces. They also can purchase a home with 0% down.

Closing Costs

Closing costs usually end up being 2-5% of the total cost. These costs include attorney fees, appraisal fees, escrow fees, homeowner’s insurance, property tax, and title insurance expenses. First-time homebuyers may qualify for grants that assist with closing costs. Sometimes, buyers even ask the seller to help cover the closing costs.

Hire a Real Estate Agent

While it may seem easier or less expensive to do the work independently, hiring a real estate agent is usually wise. They know the market and the homes that are in the price range that buyers are looking for. They can help show buyers the best home available, submit offer letters on the buyer’s behalf, and attend the closing with buyers to ensure everything is in order.

Stick To a Budget

First-time homebuyers should not let their emotions cause them to spend more on a house than they can afford. It often takes several offers before an agreement can be reached between a buyer and a seller. Many times, buyers have their hearts set on a home they cannot afford. They need to set a budget and stick to it. They will be glad in the long run.

Homebuyers ready to purchase their first home can make the process smoother by doing their homework and following these tips.