Purchasing a home for the first time can be both a daunting and exciting time for a person. Therefore, it is incredibly important to understand the ins and outs of both the real estate market and the home buying process. Failure to do so can place homebuyers in a really difficult spot, both financially and in terms of their final home choice.
This post includes a detailed guide for the first time homebuyer to follow. Some of the topics that will be covered include market understanding, choosing your real estate agent, and home inspections, to name a few. If you are looking for tips on how to sell your house for cash then look up ThePropertyBuyingCompany.co.uk.
Personal Credit Score & the Importance of it
Perhaps the most important thing you should do before anything else is checking your personal finances. This all begins with your personal credit score. Knowing and understanding your credit score is very important if you ever want to make a large purchase such as a car and yes, even your home. Your credit score is determined by a variety of factors such as credit history and your record of paying back pass debt.
This is all recorded by three credit bureaus, which include Equifax, Experian, and Transunion. You are going to want to request a hard copy of your credit score to show lenders and your real estate agent. Note that you can request two hard copies per year of your score free of charge and free of penalties.
So, why is your score that important to the home buying process? The reason why it is so important is that it determines two very important factors. One includes the interest rate you are going to receive on your loan. Having a low or no score can greatly increase your rate, and thus you end up paying more at the end of your loan term.
The second includes the amount of money you can spend. This will greatly affect the choices you have in terms of housing and the neighborhood you end up in.
Knowing Your Home Market
Even if you’re financially ready to own a home, you may want to hold off before placing any offers. The reason behind this is that you first need to understand the state of your local/state home market. So, what exactly is a home market? The home market is a combination of a variety of factors, but it mostly has to do with the demand and supply of a particular region. Therefore, when you ask your agent about it, they might reply by saying that it’s a seller’s or buyer’s market.
You want to make sure you’re in a buyer’s market. This means that interest rates are low and that home prices are at a reasonable level. There is one thing we should warn you about. Just because you find a good deal on a home does not mean you should jump on the first home, you see. You never know when a better opportunity is close by. We simply ask that you keep your options open.
20% down payment Vs. PMI (private mortgage insurance)
One of the most common things you’re going to hear is that you need to put down at least 20% as a down payment. Although there’s nothing wrong with that, it should be noted that this number is only based off the amount most lenders require someone to pay. In simpler terms, you don’t just have to put down 20%; you may want to wait a bit longer to put down a larger amount. This will help you lower your interest rate and lower your monthly mortgage payments. Now, what if you don’t have enough for even 20%, but you still need to move into a home ASAP.
The good news is that you do have options at your disposal. One of the most popular at the moment includes obtaining a PMI or private mortgage insurance. Now, just because insurance is in the name does not mean it insures you in any way. The insurance is there to protect the lender in the event that you default. What the PMI does it place a premium on your monthly payments, often at around three-quarters of a percent of your total loan. It’s safe to say that most agents will recommend that you avoid going this route.
Setting a Reasonable Budget
Just because your bank is allowing you to spend 500K does not mean you should. This is, unfortunately, one of the most common mistakes made by new homeowners. They believe that because a bank places such a high limit that they are also going to receive a reasonable monthly mortgage price. That’s not how things work.
The higher the home price, the more you’re going to be required to pay on your monthly payments. Therefore it is highly recommended to set a budget before going into the touring portion of the process. This budget should include not only include how much you can pay on your monthly mortgage payments but also your utilities, food, and other home/family expenses.
Why You need a Real Estate Agent
Touring homes, signing a few documents here and there, easy, right? Well, not so much. The home buying process is very complicated, and there is no way of knowing if you’re getting a good deal or not unless you have a professional with you. This is why it is so important to bring in a real estate agent, especially if this is your first time buying a home.
In fact, even seasoned real estate investing groups will bring in an agent to help out. Just about every major real estate market will have at least a few experienced real estate agents. For example, The Kay-Grant Group, located in the Greater Phoenix/Scottsdale area, has years of experienced in helping first-time homebuyers.
So, what can an agent do for you? An agent is essentially the middleman between your desire to get a home and the seller’s willingness to sell it to you at a reasonable price. Agents are experts at dealing with overpriced homes and difficult lenders. Trust us; you don’t want to have that on your plate with everything else going on.
Get A Home Inspection
Many states require homeowners to obtain a home inspection before placing their home on the market. Although you should definitely take a look at it, you should also take the time to get your own inspector to look at the home. This should provide you with the confidence that two sets of professional eyes have looked at the property and that you won’t get any surprised when you move in, such as mold or foundation cracking.
Buying a home for the first time can be daunting, but with proper planning, it is a venture well worth pursuing. By following the steps outlined in this guide, you will make the process simpler and more straightforward.