Are you ready to take the plunge and purchase your first home, but don’t know where to begin? Purchasing a home, especially if you are a first time homeowner can be frightening, so keep reading for tips on how to navigate the process and come out on the other side as satisfied as possible.
An important first step to take before deciding if you are ready to purchase a home would be to review your credit score. According to Zillow, Learning the minimum FICO score required by lenders, and understanding where your own credit score falls are important starting points. If your credit score is not where it needs to be at the time you are looking to purchase a home, consider continuing to rent by signing on for another 12-month lease with your landlord, or see if it is possible to go month-to-month with payments and take the time you need to build your credit score.
There are a lot of costs associated with buying a home, including the down payment, closing costs, furnishings and more. It used to be standard for homebuyers to put down 20% of the home upfront, but according to the Zillow Group Consumer Housing Trends Report 2019, only one-fifth of recent buyers (20%) put 20% down, and just over half of buyers (56%) put less than the traditional 20% down. Qualified borrowers can put down as little as 3%.
There are advantages created to encourage individuals to enter the real estate market, such as state programs, tax breaks, and federally backed loans. According to the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer is anyone who meets any of the following conditions:
- An individual who has not owned a principal residence for three years. If you’ve owned a home but your spouse has not, then you can purchase a place together as first-time homebuyers.
- A single parent who has only owned a home with a former spouse while married.
- A displaced homemaker who has only owned with a spouse.
- An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
- An individual who has only owned a property that was not in compliance with state, local, or model building codes—and that cannot be brought into compliance for less than the cost of constructing a permanent structure.
Once you determine you have good financial health and enough savings to buy a home, you will want to get pre-approved. According to Investopedia, it is important to make sure to get pre-approved for a loan before placing an offer on a home: In many instances, sellers will not even entertain an offer that’s not accompanied with a mortgage pre-approval. You will want to work with a licensed real estate agent. A real estate agent will help you discover homes that align with your needs in your price range, then take you to view those homes. Once you’ve chosen a home to buy, these professionals can assist you in negotiating the entire purchase process, including making an offer, getting a loan, and completing paperwork. See this article for more information on financing and other resources. As of June 2021, here are the best mortgage lenders to work with. It is a good idea to review these choices carefully to pick the best lender for your situation.
Once you have the financial component figured out, it is time to make the offer. Remember to be flexible with your demands, and work with your agent to come up with a fair price range and how to negotiate. You will also want to have the home inspected and appraised. These are important steps as both will give you a better understanding of the condition and value of your home so you’re informed before the keys are transferred to you.
After you have completed this process you should be all set to close your loan and to move into your new home! Although there are many wonderful benefits to homeownership, it comes with a lot of responsibilities, and you must continue to save and budget for maintenance and repairs of your new home. It is important to take your time with this process and make sure you are ready to stick with this decision long term.