Embarking on Your First Home Purchase Journey: An All-Inclusive Guide to Mastering the Basics

HOME BUYING
Simple Guide for First-Time Home Buyers: All You Need to Know
By
Hal Kitzmiller
Updated
November 19, 2021
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Owning a home is a dream for many of us. Unfortunately, it seems a bit tough for first-time buyers to step onto the property ladder. But, don’t fret! It can look like a big mountain to climb, but when you break it into smaller steps, achieving your dream is much easier than you might think.

To make you more comfortable, let’s discuss what it takes to buy your first home, including costs, requirements, and the process.

What to Do Before Buying a House

Consider these important steps before buying your first home:

Boost Your Credit Score

Your credit score plays a crucial role in securing a mortgage. Lenders check your debt history, repayment records, open bank accounts, and several other financial details. Don’t worry if your score isn’t great. There are ways to improve it. Use apps or websites like Credit Karma to keep track of your score and get tips to enhance it.

Lower Your Debts

Decrease your debts before applying for a mortgage. Doing this will increase your chances of passing the affordability checks your bank will conduct. These checks look at your income and regular expenses to check your repayment capability. It becomes even more critical if you’re the sole earner.

Start Saving

Start saving for your down payments and other fees even if your house buying plan is a few years away. Look at banks offering good interest and security on savings accounts. Consider opening a First-time Home Buyer Savings Account, which generally offer great interest rates.

Do Your Homework

Researching is key. Spend time understanding the market, neighborhoods, home types, realtors, and mortgage lenders. Since buying property is probably the most significant investment of your life, learning about every little thing will help.

Understanding the Costs

Being a first-time buyer, you might think that having a down-payment and a steady income is enough. But, actually, there are other costs involved too. Don’t worry though, as long as you’re prepared for them, they shouldn’t throw you off track.

Down Payments

Down payments usually range from 0% to 20% of the property’s price. But as a first-time buyer, don’t expect a 0% down mortgage. Generally, first-timers pay between 5% – 10% down.

The inside stuff about mortgages

The critical considerations for a mortgage are the total cost, term period, interest rates, and monthly payments. Preferably look for mortgages with low-interest rates and fixed-rate terms.

Closing Costs

Besides your property price, you also need to budget for closing costs, including inspections, appraisals, taxes, insurance, and title searches. It’s useful to have a separate savings pot for these costs.

Repairs or Renovations Costs

After buying the property, there might be a need for repairs or renovations. Depending on the house state, you might need to shell out a fair bit for these fix-ups.

Steps to Buying Your First Home

Now that we know the preparation involved, let’s see the actual process of buying your first home.

Contact a Mortgage Lender

Start by understanding your mortgage options and getting a sense of your affordability. An experienced mortgage advisor will guide you through this.

Get Pre-Approved

After you’ve talked about your options, your lender will work towards your pre-approval. Having pre-approval means you can start looking for your home with the confidence of having a lender backing you.

Find the House You Love

Now it’s time to look for your dream house! Explore options, visit neighborhoods, and engage a reliable realtor.

Make an Offer

Once you’ve found the home and your mortgage is pre-approved, you can put forth your offer to the seller. If it gets accepted, coordinate with your lender to finalize the mortgage details.

Finalize the Deal

Before you can close the deal, wait for a few weeks for the mortgage to get ready. This period can sometimes extend due to factors beyond your control.

Top Tips for Buying Your First Home

To wrap it up, here are some vital tips to consider:

1. Engage Professionals: A good realtor or mortgage broker can make the process easier and help you get the most for your money.
2. Keep Finances in Check: Be practical about your finances and never overstretch.
3. Plan Ahead: It can’t be stressed enough – start early and keep saving.

Conclusion

Buying your first home can seem a daunting task. This guide offers tips to make it easier. Remember, being well-prepared and well-informed is key to achieving your dream.

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Tags: #Family, #Finance, #Money Management, #Mortgage, #Real Estate