First-Time Home Buyer’s Guide: Tips to Navigate the Process

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Making the decision to buy a house is a big one. A major financial investment, your home purchase will not only affect your finances, but also your lifestyle. While navigating the mortgage application and house-hunting process can be stressful, it can also be an exciting time, providing you understand how to achieve your goals. Rely on this guide and its helpful tips to give you the information you need to buy your first home successfully — and learn how to avoid the pitfalls and make a smart real estate purchase.

First-Time Home Buyer Considerations

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The more initial consideration you put into your home-buying plan, the more streamlined you can make the process. If you have a family, your needs are likely to be quite different than if you’re shopping for a home for yourself or for you and a partner. In fact, before you even contact a real estate agent, ask yourself some questions. Your answers will help you and your agent locate the properties that will suit you best:

  • What type of home do you want — ranch, townhouse, condominium?
  • What square footage is ideal for you?
  • How many bedrooms and bathrooms do you need?
  • What special features do you want — a two-car garage, solar power system, swimming pool, basement?
  • What home features are you opposed to — multi-story floor plan, septic system, excessive landscape maintenance requirements?

Consider location carefully. You aren’t only shopping for a house — you’re shopping for the ideal neighborhood and community too. Ask yourself questions such as:

  • Is public transportation available?
  • What is an acceptable commute time to work?
  • What amenities do I want — a public pool, parks, community center, nearby shopping and dining?
  • How are the area’s school’s rated?
  • What’s the area’s crime rate?

There are many factors that go into selecting the ideal property and setting. Consider them carefully so that you can choose the best property for you and your household.

First-Time Homebuyer Advantage

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First-time homebuyers can often look forward to various incentives designed to help them buy real estate. There are various programs and loans available to first-time home buyers that aren’t open to other buyers. In fact, you may even qualify for home-buyer financial assistance.

Do You Qualify as a First-Time Home Buyer?

If you’ve never purchased a home before, you should be able to take advantage of first-time home buying benefits. However, some buyers may also qualify for these programs if they haven’t owned their primary residence in the past three years. Your real estate agent or lender should be able to discuss the different options that you’re eligible for based on your specific circumstances. If they aren’t, find one who can.

What Are the Requirements Needed to Qualify as a First-Time Home Buyer?

There are generally financial requirements associated with first-time home buyer loans and benefits. For instance, some individuals who earn more than what’s considered low or middle income in their state or county may not qualify for first-time home buyer benefits.

What Are First-Time Home Buyer Programs?

There are various first-time home buyer programs that you should learn about before purchasing a home. Some are more apt to suit you than others. For instance, there are some loans for first-time buyers that require little or no down payment. Be sure to research the following programs in order to find the ideal one for your situation:

  • USDA Loan
  • VA Loan
  • FHA Loan
  • Fannie Mae or Freddie Mac programs
  • Good Neighbor Next Door Program
  • Native American Direct Loan
  • Energy-Efficient Mortgage
  • State and local first-time buyer grants

In some cases, you might even qualify for multiple options. For instance, you might qualify for both an FHA loan and local grant if you wall within acceptable income levels. These programs were designed with the goal of helping more people enjoy the opportunities associated with home ownership.

The Buying Process

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It’s typically a good idea to get some of the headache associated with buying a house over with before you even look at properties. In short, apply for pre-approval for a home loan. This way, you can find out exactly what the bank or lender will approve you for and you can limit your house hunting to homes within your budget frame. Be sure to have all the documents and paperwork on hand for this process. Even after you’re pre-approved, you’ll need them again at other times during the mortgage process:

  • Credit score
  • Recent bank statements
  • Proof of employment with recent pay stubs
  • Last three tax returns
  • Any documents pertaining to your financial assets

Find a Real Estate Agent

Since this is your first time shopping for a house, it’s a good idea to get help from an experienced real estate agent. Typically, there’s no charge to buyers for securing the services of an agent. Real estate agents have access to a wide range of resources designed to help people find the ideal property for their needs and budget.

Shop Around

Be sure that you examine several properties in order to have a good idea of the types of houses on the market in the location you wish to live. Use helpful digital apps to chronicle your home visits so you can refer to them when making your decision about whether or not to place a bid.

Get a High-Quality Home Inspection

Once you decide to bid on a house and the seller accepts your bid, you’ll want to order a thorough house inspection by a certified home inspector. The inspection will uncover any damage or problems that you may not be aware of. Depending on the findings of the report, you may choose to proceed with the purchase (or not) or negotiate for a better deal.

Avoid These Mistakes and Pitfalls

Even experienced real estate buyers make mistakes. Because each deal is subject to its own particulars, make sure you take your time to consider your purchase carefully before signing on the dotted line. Here are just a few of the mistakes that it’s important to avoid if you to save yourself unnecessary stress:

  • Making a quick decision. It’s better to look at more properties than fewer. Be sure you examine all the different home options available.
  • Miscalculating repair and renovation costs. Remember that your monthly mortgage will NOT be your only living expense. Be sure you weigh the maintenance and repair costs associated with any home you buy.
  • Emptying your savings account. While you might want to put down as much as possible on your new home, don’t drain your savings account. It’s a universal truth—if you do put it all into your down payment, something major will go wrong and you’ll need a new refrigerator, sewer line replacement, or tree removal. Don’t underestimate emergency costs such as these.

Create a Saving Plan

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If you’ve just decided to buy a home and don’t yet have an acceptable down payment, you’ll need to create a savings plan. Although most people generally believe that they’ll need to put the traditional 20% of the home’s cost down in order to qualify for a mortgage, that’s not quite the case. In fact, the average down payment is about 7%. However, there are different types of loans that may specify the amount you must put down. For instance, some state and local grants provide a matching requirement. For instance: they will provide $5,000 if you also contribute $5,000 to the down payment. These programs often have certain requirements. For instance, in order to not have to pay this money back, you’ll be required to live in the home for a minimum of five years.

You’ll probably need to make other financial adjustments. Be sure to maintain good credit while still continuing to use your credit cards. Don’t necessarily pay off your credit card debt. Lenders don’t want to lend to people with too much debt but they also want to see that you pay your bills on time. You might also have to make lifestyle changes in order to save more money. This may mean reducing your travel or entertainment expenses in order to save money for your down payment.

Essential Home Buying Tips:

  • Get pre-approved for your mortgage—you’ll be glad you did!
  • Be sure to set aside some money for closing costs—sellers don’t always pay for these costs, but you may be able to negotiate them down or away.
  • Work with a real estate agent who has experience helping first-time home buyers—not all agents are created equal. Look for someone who enjoys the first-time buying process.
  • Be careful about older homes. Any home can become a money pit, but older homes often have more maintenance and replacement needs—and that comes with a cost you might not be prepared to pay.
  • Consider the neighbors. While you can’t ‘interview’ the neighbors of a home you want to purchase, it never hurts to learn a bit about them.
  • Stay within your budget. You know what you’re comfortable with budget-wise, so don’t overspend. In fact, just because the bank pre-approves you for a certain amount doesn’t mean you can’t shop for a house that costs less.

First-Time Homeowners FAQs

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How Much House Can I Afford?

When you apply for pre-approval, the bank will tell you how much you can afford. However, consider your lifestyle and how much you spend monthly. The last thing you want to do is purchase a house you can’t afford.

How Long Does It Take to Purchase a House?

Once you find a house, bid on it, and hear back from the seller that they accept your offer, you can usually expect the closing to take place anywhere from 30-45 days later. The time frame varies with each deal, however.

Aside from the Mortgage Payment, What Other Monthly Fees Do I Have to Pay?

Depending on your home loan, your property taxes and home insurance costs may be included in your mortgage payment. If not, you’ll need to make these payments separately.

What Credit Score Do I Need to Qualify for a Home Loan?

Keep in mind that every loan and lender will specify a different amount. However, a score of 620 or lower is considered poor. The better your credit, the better interest rate you’re going to qualify for.

How Do I Choose a Lender?

Just because a lender pre-approves you for a mortgage doesn’t mean you owe them your business. Always shop around for a lender in order to get the best terms for your loan.

Summary

Keep this guide on hand as you navigate the home-buying process. Don’t be afraid to ask lots of questions. If your real estate agent or lender appear unenthusiastic about answering all your questions, shop around for someone else. Buying a house is a major financial and lifestyle commitment. You have every right to weigh your options slowly and carefully, obtaining all the information you need to make a smart decision.