8 Tips for First-Time Homebuyers
03-16-2021 • MHS Lending
Buying your first home is one of the most exciting times in your life. Now that you know you want to start the journey, there’s a lot of prep work that you can do to set yourself up for success. From preparing your finances for the costs of buying a home to doing your research and finding a realtor and lender you can trust, here are some of the main tips for you to start the process of buying your first home.
One: Pay off debts
A home is one of the largest purchases you will make in your life. It’s important to get started feeling as confident as possible. Making sure your finances are in a comfortable spot will ensure you are better prepared. Paying off or paying down debts can help you feel more secure so you can buy the home of your dreams.
Wondering if you can bundle some of your debt into your loan? Some loans do allow you the ability to bundle loans like student loans into your home loans. Check with your lender to see if this is a good option for you. Before you start your home buying journey, understanding the ins and outs of your finances will set you up for success.
Two: Save for a down payment and closing costs
Everyone knows that the more you bring to the table at closing, the lower your overall costs will be. While it may be difficult to bring a full 20% of your total cost to closing, having some financial stability will help you afford the house you want. In addition to a down payment, most loans will incur closing costs. According to NerdWallet, closing costs run anywhere from 2% to 5% of the total loan cost, including property taxes, mortgage insurance, and more. Most of the closing costs fall on the buyer, so if you’re the one purchasing the home, you’ll see these on your statement and it’s important to budget for them.
There are a few exceptions to the amount you need to bring to closing based on the loan you get. For example, if you are a Veteran or are actively serving in the US Military, the VA Home Loan is a great option reserved exclusively for you. The VA Loan does not require any down payment and there is no PMI added to your monthly costs (private mortgage insurance). While there is a funding fee required at closing, this can often be bundled into your full loan and is much less than the typical 20% down payment many first-time homebuyers choose to bring to closing.
Three: Find your A-team
When you’re ready to buy your home, there are a few key people you need to work with. Finding qualified lenders and realtors that you can trust can give you peace of mind as a first time home buyer. When searching for the best lenders and realtors, it’s important you find people who are experts on the loan you’re looking for, experienced in the industry, and have a stellar reputation. These factors will help make your journey easier from start to finish.
Four: Get pre-approved
Pre-approvals are preliminary evaluations of potential borrowers by a lender. These are incredibly powerful and tell you, as a home buyer, what your buying power is. Your lender will first need to run a credit report to determine your credit score and debt-to-income ratio. With the pre-approval, you’ll be able to determine the price range you can afford when you’re searching.
Another benefit is that sellers are motivated to move their homes quickly to buyers who can prove they’re able to buy the home. Having a pre-approval in hand when you make an offer will show the seller and their real estate agent that you mean business.
Five: Research the neighborhood you’re looking to move to
You’ll likely live in your new home for years, so it’s important to like where you live. Do some research online and drive around the neighborhood if you’re able to so you can get a good feel for what’s around. If you love being close to hiking spots, check out how far your potential home is to the nearest trail. If you have a favorite grocery store or want to make sure you have lots of restaurants nearby, map out the area around you. Knowing what’s just around the corner when you first move in will help turn your house into a home in no time!
Six: Make your list of wants and needs
While it would be awesome if every home came with the exact amenities we want and need, it doesn’t always seem to be the case. When you’re starting your home buying journey, make a list of your wants and needs and organize them by priority. If having a garage is crucial for you but you could go without a fireplace, note that. Think about what is most important to you and your family when making your list and be prepared to compromise on the items that are lower in priority. Giving this list to your realtor will help you narrow down the homes available so you can find the ideal one for you.
Seven: Think long-term
When buying your home, it’s a good idea to think about the process with a long-term lens. Whether you plan to stay in the house for 5 years or 50 years, you’ll want to make sure the area and house have what you need to feel at home. If you’re thinking of growing your family, researching the schools nearby is important. If you’re open to having your parents move in after they retire, look for homes that can accommodate everyone comfortably. Think about the house with your long-term goals in mind so you get a home that you can grow into.
Start Your Home Buying Journey Today!
At MHS Lending, we offer an extensive product portfolio in order to offer home purchasing solutions for every military member and veteran. If you’re ready to start your home buying journey, contact our team today at 619-728-7620.