Buying your first home is exciting but also scary. This purchase is one of the biggest people make in their lifetimes, so mistakes cannot be accepted. How can a first-time home buyer navigate this process seamlessly while avoiding common pitfalls?
Save Early
Begin saving for the home purchase early. Many people focus on the down payment and closing costs, overlooking many other moving costs.
Most lenders require a minimum of three percent down, and closing costs usually run between two and six percent of the loan amount. You also need to save money for moving costs, utility security deposits, and unexpected expenses when buying homes for sale.
If you live in Washington State, you might be interested in checking out these homes for sale in Deer Park, Washington. Deer Park is a small city, about 15 miles north of Spokane, known for its rural charm and offers a quiet, close-knit community feel.
Set a Budget
Add the mortgage payment, insurance, and property taxes when determining how much home you can afford. Learn how much the average person pays for utilities in homes of similar sizes and determine if additional services will be needed.
For example, a homeowner might need to pay a lawn service to care for the yard or buy a lawnmower to do this task. Expenses such as these can quickly add up when a person isn’t prepared for them.
Credit Score
A person’s credit score determines whether they qualify for a home loan and the interest rate they will pay on this loan. Higher scores typically lead to lower interest rates, so buyers need to ensure there are no errors on these reports.
If the score is low, improve it before applying for a loan.
Compare Loan Options
First-time home buyers may choose a conventional mortgage or apply for an FHA loan offered through the Federal Housing Administration.
Certain homes may be eligible for a USDA loan secured by the United States Department of Agriculture, and military members and veterans should look to a VA loan guaranteed by the Department of Veterans Affairs.
Look into 30-year fixed-rate loans, 15-year loans, adjustable-rate mortgages, and balloon mortgages.
Assistance Programs
A city or state may offer first-time home buyer programs, so people should look into these programs before purchasing. The programs help with the down payment and closing costs while giving buyers access to low-interest-rate loans.
Certain homebuyers might receive a grant or forgivable loan to help purchase the home, and tax credits may be offered.
Compare Rates and Fees
Interest rates and fees vary by lender.
Homebuyers should request loan estimates from multiple lenders before choosing a company. The Consumer Financial Protection Bureau reminds people to request estimates for the same type of mortgage to ensure accurate information is received.
When looking at these estimates, pay attention to origination fees, discount points, and other items that may affect the total loan cost.
Secure Preapproval
Mortgage preapprovals have become standard today. Many real estate agents won’t work with potential buyers without this preapproval, which shows the person is serious about buying a home.
To secure the preapproval, the borrower must gather loan documents and ensure their credit score is high enough to secure the funds. Borrowers may apply for preapproval from multiple lenders without hurting their credit score if all applications are submitted within a limited period.
Buying a home is a significant financial move.
Borrowers must understand what they are getting into. Work with a lender, real estate agent, or other professional experienced in the process to ensure nothing is overlooked. Doing so will make the home purchase process move smoothly from start to finish.