First Time Home Buyers

For most people, buying a first home is both exciting and scary. It’s easy to get overwhelmed by the whole process if you aren’t properly prepared for what’s to come. Here are a few tips to ensure your first home-buying experience is stress free and successful.

Tip No. 1: Financially Prepare for the Investment

Money is certainly the top stressor for home buyers, but preparing early for the monetary aspect of buying a home can reduce that anxiety and help you make a smart financial decision. 

It all starts with determining how much house you can afford. The rule of thumb is that your monthly housing costs – including principal, interest, taxes, insurance, and homeowners association (HOA) fees – should be less than 25 percent of your take-home pay. You don’t have to spend that much, but you don’t want to budget for more than that.

Once you know what you can afford, determine what your out-of-pocket costs would be at closing, and start saving. Plan for a 20 percent down payment and anywhere from 2 – 7 percent for closing costs. 

You will also want to check your credit scores and improve them as necessary. Tips for doing so include paying down your debts, keeping credit card balances low, paying your bills on time, and avoiding opening new accounts.

Tip No. 2: Compare Mortgage Rates and Lenders

Each lender’s rates and terms will vary, so take your time and shop around. Talk to at least three different lenders and request information and rates for all of their mortgage loan options. You will want to find the best rates for the type of loan that fits your needs. But that’s not the only consideration when shopping lenders; you will also want to find one you are most comfortable with. Ask a lot of questions and gauge their responsiveness and communication abilities.

Tip No. 3: Research First-Time Home Buyer Programs

There are many first-time home buyer programs that can help cover the expenses for down payments and closing costs, as well as other incentives. Such assistance programs are usually limited to borrowers with an income below a certain level as well as other qualifications. Such programs include: 

• Federal Housing Administration (FHA) loan.
• VA loan.
• USDA loan. 
• Fannie Mae conventional and HomeReady loans.  
• Freddie Mac home possible loan.
• Good Neighbor Next Door loan.

Do your research and see if you qualify for any of them and whether or not they can help you financially. 

Tip No. 4: Consider All Types of Homes

Most first-time home buyers start their search by considering only single-family homes, but there are a number of other options out there that may better fit your lifestyle, needs, and financial situation. Most are less expensive than single-family homes, but the trade-offs may not be worth it for you. Such homes include condominiums, townhouses, manufactured homes, and fixer-uppers. There are pros and cons to each so make sure to carefully consider all aspects before making a decision of which one is best for you. 

By following these tips and getting prepared, first time home buyers can take the edge off of a typically stressful process.