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Home is where the heart is. That is why for first time homebuyers, this is the single biggest decision you can possibly make. The decision you make now will bring you a lifetime of memories.
In fact, according to the National Association of Realtors, first time homebuyers make up 34% of total home buyers. If you are in this group, you are not alone, and you are in good company! We know that buying a home is scary, all you need to do is prepare a little.
We have a few helpful tips we know can help. Ready for it? Let’s go!
- Build an Emergency Fund and Pay Off Debt
We know you want to hear advice on how to purchase a home for the first time, and this is an important tip for you. Buying a new home is expensive. It costs more than renting.
When you have a new house, you handle everything. This includes maintenance, mishaps, and upkeep. It will surprise you how fast this can add up and so quickly!
Before you purchase a home, you want to be debt-free and establish a “rainy day” fund.
- You Need a 10-20% Down Payment
If it is not workable to pay the total price of a new home, then you want to save at least 10-20% for a down payment, if not more. If you pay a 20% down payment, you will not have to pay PMI or private mortgage insurance.
PMI protects the mortgage company. They use this in case you cannot make your payments and foreclose. It is usually 1% of the total loan.
They will charge you each year. This can add up.
- Choose a Fixed-Rate Mortgage
First time homebuyers should only go with a fixed-rate mortgage. The best option is a 15-year fixed. You can go with a 30-year fixed, but you will end up paying a lot more interest.
You want to avoid an adjustable-rate mortgage or ARM. They may appear to have a low-interest rate at first, but remember that the lender can adjust the rate.
- Save for Closing Costs
The average closing cost is approximately 3-4% of the purchase price of your new home. You will need to pay this along with a down payment. Your lender will let you know the exact dollar amount to bring on closing day.
The closing costs will pay for the home inspection, appraisal, credit report, attorney, and homeowner’s insurance. You want to tackle this fee right away, so have it saved in advance when you purchase a home.
- Before You House Hunt, Get Pre-Approved
If you have the down payment and closing costs, you are ready to get pre-qualified for a home loan. Get a pre-approval letter before you house hunt. This proves to a seller that you are a serious buyer.
For details about how to get pre-approved, click for more information.
- Be Patient
This is a marathon, not a sprint. You want to think in the long-term about what is the best fit for you and your family (or family to be). Be patient.
A good way to strategize is to find a new home that is most affordable and in the best neighborhood. Purchasing a house at the bottom price range and in a pleasant neighborhood allows you the opportunity to build home value.
First Time Homebuyers
If you are one of the many first-time homebuyers in the world, congratulations! We are excited for you, and we hope these tips are valuable for your journey. Visit us again soon for more brilliant advice and new articles.
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