First Time Home Buyer Tips

Being a first time home buyer is intimidating and a big life experience. Some first time home buyers often don’t know where to begin. We can help. From mortgages, to home searches in your best places to live and schools information we can give you the tools you need to move forward. One of the first steps to being a first time home buyer is to get your financial house in order and make sure your credit is great. Once pre-approved for a mortgage, the home search process (the fun part) begins.

There are lots of floor plans, architectural styles of homes and neighborhoods research you’ll want to explore before settling for a place and looking for homes. Search homes online and get help from a buyer’s agent to help you secure a great first time home at a fair price. The mortgage types for first time home buyers may be more difficult to get these days and the process intimidating.  They don’t have to be if you can connect with a good, experienced lender.

Once your offer is accepted be sure to check out moving resources to get quotes on movers and other tools for first time home buyers moving into a new area.  As a first time home buyer be sure to keep some things in mind before you settle down. Is the neighborhood great? Is the area appreciating? Does your home have the room you need for family growth? How is the job market in the area and how close are your favorite hot spots?

First Time Home Buyer Steps

Your Credit, Your Sparkle

Good credit can lower your mortgage interest rates, potentially saving you hundreds of dollar a month. Order a credit report perhaps free online or ask your lender for one.  You can dispute any mistakes, but the most important thing is to build up good credit from here forward.

Lenders want clients who can pay bills on time and who don’t owe too much to anybody else. Automated bill-paying services help. Stop applying for credit cards.   Consider closing some of your accounts, but that’s tricky. Maxine Sweet, Vice President of public education at Experian, says lenders don?t want to you to owe near your limit, which can happen if you consolidate to one card. Your score can dip temporarily when you make any big change — even for the better– so work on your credit long before you seek a mortgage, she says.

Saving for a down payment and closing costs

Home buyers traditionally had to put up a 20% down payment. Now it’s more like 3-10%. Some don’t put anything down. “There’s nothing typical today,” says Pat Vredevoogd Combs, president-elect of the National Association of Realtors.  You’ll always get a better deal if you make a down payment. Until you’ve paid for 20% of your home, your lender will probably want you to buy insurance on your mortgage. The buyer also has to come up with closing costs, about 1-2% of the price.

Calculate how much house you can afford and are comfortable with

Today, a good rule of thumb ratio for buyers is 25-30% of their pre-tax pay available for housing.  That translates roughly to a mortgage of 3 to 4 times your salary. Consider your entire budget: How is your credit card bill, student loans or car payment?  How much will your new home cost to maintain? Will you get a big break on your taxes from the mortgage interest rate deduction?  Your lender can help here.

Shop for a mortgage

New loan offerings make it easier to buy a home, but harder to pick which mortgage is right for you. The standard 30-year fixed rate mortgage allows predictable payments. If you’re planning on moving again quickly, consider an adjustable rate mortgage, which has low interest and payments for the first few years. Buyers have really low starting payments with interest-only loans, but they don’t build up any equity in their homes.
Compare terms and rates from several sources. A pre-approved mortgage will let you pounce on the right house. Your lender will estimate your monthly expenses with you including principal, interest, taxes and insurance. You’ll pay a monthly bill into an escrow account instead of getting clobbered by annual taxes.

Shop, Shop, Shop

Make a list of the features you want or don’t want. A realtor can be a great help, so much so that some start planning here months or years before they’re ready to buy.
The buyer pays the sale commission, which typically runs 5-7%, split between the seller’s agent and buyer’s agent. So — especially first time buyers — get the service basically for free. First time buyers need guidance with people who are selling their own homes, figuring the lack of a commission means a lower price.  The seller usually wants to keep those extra dollars rather than “give” them to a buyer.

Making an offer

How much did similar homes sell for nearby? What compares? How long has this house been on the market?  Your realtor  evaluates market conditions and help you make a reasonable offer.  You sign and provide earnest money held by one of the real estate agencies in a trust or escrow account.

Inspect and Expect

Make sure your contract is contingent on a home inspection for a detailed, objective evaluation of your home’s infrastructure. After, negotiate with the seller over needed repairs. Your closing attorney will verify that the title of the house is free of any liens. Your bank will require an independent appraisal on the home too.  Shop around for insurance on the home, but your own car or life insurer will probably give you a good package deal. As always, a higher deductible saves you money.