Buying a home is a major milestone and a significant financial decision for many people. It can also be an exciting but stressful experience, especially for first-time homebuyers.
Whether you’re just starting to think about buying a home or you’ve already started the process, the tips we discuss in this article will provide valuable insights and strategies to make the experience as smooth and successful as possible.
Determine your budget
The first step you should take as a first-time homebuyer is determining your budget. Some factors you should take into account when determining your budget include your location, the time of year, and your household income.
Knowing your budget will help you narrow down your home search and help you avoid wasting time shopping for homes outside of your price range. It will also help you determine what kind of mortgage you can qualify for and what your monthly payments will be.
Getting pre-approved for a mortgage
After determining your budget, the next step is to get preapproved for a mortgage from a reputable lender. With recent advances in technology in the mortgage industry, it’s now possible to get pre-approved and issued a mortgage online without consulting with a mortgage loan officer in person.
Getting a pre-approval letter from a lender is important for several reasons. First, a pre-approval letter shows sellers you have the means necessary to afford the home. A pre-approval letter may also allow you to lock in an interest rate for a certain period of time, protecting you in the event that interest rates increase in the future.
Find a trustworthy real estate agent
Finding a trustworthy real estate agent is another important tip for first-time homebuyers. A trusted agent has your best interests at heart and will work hard to find the right home for you and your family.
On the other hand, real estate agents with little to no experience may lack negotiating skills and could potentially fumble your next real estate deal. It’s always a good idea to research online reviews and ask important questions to a real estate agent before deciding to work with them.
Don’t waive home inspections
After you’ve shopped around with your real estate agent and found one or more homes you’re interested in, there’s usually a period of negotiations that take place. This is when you and the seller agree on the terms of the real estate deal and determine important things like the sale price, closing date, and contingencies.
One contingency you shouldn’t waive is a home inspection. Home inspections may expose unseen issues with the property that may not be visible to the naked eye. Costly problems that may be missed by waiving a home inspection include foundation issues, plumbing problems, and electrical issues.
Understand closing costs
Closing costs are all the fees associated with finalizing the sale of real estate. These fees are typically paid by both the buyer and seller, and amount to 2 to 5 percent of the sale price of the home.
Understanding closing costs is important since you’ll need to come to the closing table with enough cash to cover the closing costs (unless you finance your closing costs into the mortgage).
By setting a budget and saving money before buying a home, you’ll put yourself in the best position to have a smooth homebuying experience.