Buying your first home is not something you (or anyone) should take lightly. You should be prepared with as much information about the process as you can learn before you begin. You should understand your real estate market and the current mortgage market. The more you know – the better.
The Best Buyers Market in History
For example, did you know this was one of the best times in the history of the United States to be a first-time home buyer? Not only are home prices at their lowest levels in years (some areas have seen prices drops up to 50% in the past few years), but there are other great reasons to buy a home today.
10 Tips Every First-Time Home Buyer Should Consider
The following are key questions you, as a first-time home buyer, should ask yourself:
How Much Home Can You Afford?
As a first-time home buyer, it’s important to have an accurate idea of how much money you can borrow for your new home and most importantly, how much you can afford. Sometimes those two aren’t exactly the same (depending on your financial situation), so always use what you can afford as your main metric for deciding how much house you should mortgage. One of the realities of first-time home buying is the frustration of finding that perfect home only to discover that it is not in your price range.
Should You Get Pre-Qualified or Pre-Approved?
Often a mortgage lender will tell a potential buyer they are “pre-qualified” for a loan. This can confuse first-time home buyers, who think they will qualify for that amount. Not likely. With a pre-qualification, little information about your finances is verified (often none). You might find out later that the amount you were “pre-qualified” for is far different than what you actually will qualify for (or even afford). What you need is a “pre-approval” in which more information (your credit and other factors) is checked and you can have a better idea how much you can afford for your first home. With a pre-approval, you’re in a better position to negotiate because the seller knows that your offer is more solid. You’ll avoid wasting time looking at homes outside your price range.
What Kind of Mortgages Should You Consider?
For first-time home buyers, mortgages can be confusing and a bit overwhelming. Ask your mortgage banker every question you can think of. There are no dumb mortgage questions, especially for first-time home buyers. A good mortgage banker will ask you numerous questions about your specific financial needs so that they can match you with the best mortgage.
The mortgage best for you will depend on:
What Is a Purchase Agreement?
The purchase agreement sets the amount of your offer and usually includes extra details, such as which appliances stay, who pays closing costs (seller can pay closing costs on some home loans) and when you’d like to take possession of the house. The seller (or selling agent) will have you sign the purchase agreement and offer “earnest money.” Earnest money is a deposit showing that you’re serious about your offer to buy the home; it’s usually three percent of the asking price and later applied as part of your down payment or other closing costs. It is a check that your agent holds on to until the offer has been accepted. Title companies can also prepare a purchase agreement. If you choose not to work with a realtor, seek the advice of an attorney to help you prepare your documents.
So there you are! As a first-time home buyer, you’re on your way to being better prepared for getting a mortgage and buying your first home.