Congratulations on planning for your future and looking into purchasing a home. There are things prospective first time homeowners can to make your first transaction go as smoothly as possible.
- Talk to a Lender – This step is essential! Not only will a lender be able to give you a price range, they will also be able to talk to you about the different loan options. There are often first time home buyer incentives that can help minimize or even eliminate the down payment and/or closing costs.
- Start Saving Today – The more you save before purchasing a home, the less interest you’ll pay for the life of the loan. Even $50-$100 per month makes a difference. Also, though not required, saving enough to make a 20% down payment means not having to pay for mortgage insurance, saving you money in the long run. First time homebuyer may qualify for loan programs with lower down payments.
- Improve Your Credit – Any lender should be able to look at your current credit situation and give you tips for improving your credit score. These tips may be as simple as making a large payment on only one card for this month and putting your expenses on different cards to diversify your credit across multiple cards. The better your credit score, the better chance you have of getting the best possible interest rate.
- Prioritize – You have been to a lender and received a pre-approval, now it’s time to get realistic. You have lots of options and your search will go more smooth if you are able to narrow things down a bit before beginning your search. Do you want to live in a smaller house that’s full of character or condo in a swanky neighborhood downtown that is close to all the great restaurants, festivals, and boutiques? Do you prefer to be in the suburbs where homes are larger but all quite similar, yards are larger than in the city but more manageable than a rural lot, and shopping is convenient? Or is a rural location with a large lot and few neighbors your ideal?
- Establish a Budget – How much you’re comfortable spending and how much you’re approved to spend are probably two different figures. Think about how much you spend on housing now, include utilities, cable, internet, etc. Now realistically, can you comfortably afford to spend more than that and still have enough money to contribute to a rainy day fund, retirement fund, etc.? Write down the total amount you are comfortable spending each month. If this number is lower than your pre-approval amount, this is what you should use to set your price point.
- Choose a Realtor – Ask friends or coworkers for recommendations if you don’t already have one picked out. Set up an initial meeting to make sure your personalities mesh. You may or may not talk about real estate much at all during this getting to know one another meeting.
- Sweat Equity – Yes, you can hire people to move your furniture, paint your home, professionally clean your home, etc. But those costs may be unnecessary. Sweat equity can save you money. If you can devote a couple days to painting, a day to renting a carpet cleaner, and a few days to packing your own moving boxes, you can save hundreds if not thousands of dollars. Start helping your friends move today, then you’ll be able to ask them for a hand when it’s your turn to move. All that extra money can be used to start a rainy day fund or for furniture and decor.
- Trust Your Instincts – When you find the perfect home for you, you’ll know. The location, price, and home itself will just feel right. You may know it’s the one for you before you even go look. Go look anyways.
- Take Your Time – There’s always another house. Take comfort in that. If for whatever reason the first one does not work out, there is always another house. Buying a new home is emotional. All too often, eager buyers want to bite at the first property they think they love. If you find that first property in the first week of your search, chances are you’ll find others that fit your criteria as well, and you may end up liking them more. Relax. Hope for the best, but know that there’s always another house.