Preparing to purchase property for the first time is an exciting financial and lifetime milestone to hit. Not only are you getting ready to make one of the biggest investments you’ll probably ever make, but you’re also getting a glimpse into what your future will look like over the next several years or even decades. What schools will your kids attend, how long is your commute to work, and how will you renovate are all exciting questions to ask and answer as you embark on this journey.
In addition to all of the fun tasks on your to-do list, there are plenty of challenges new homebuyers must navigate before they can call their dream home their own. In this post, we’re clueing you into 4 home buying tips for first-time owners. Stick with us to learn more about approaching finances, assessing what you can afford, and how you can choose a real estate agent wisely.
1. Assess your credit score and finances
Before you start shopping for your dream home, it’s a good idea to see where your finances stand. Because most financing opportunities through banks take your credit score into consideration, this is a good place to start. Each year, consumers are entitled to one free credit report from the major credit reporting bureaus so you can access your numbers there or check to see if your bank or credit card issuer offers credit reporting.
Most mortgage lenders require a minimum FICO score between 580 and 620 to qualify for a mortgage. (Unless you are a senior age 62+ you should investigate a reverse mortgage lenders) Keep this range in mind as you assess your score. If your credit report isn’t looking as shiny as you’d like it to be, you might consider pausing on your property search until you’ve improved your score — having a better credit score can really pay off when it comes to securing a good financing rate.
In addition to checking your credit, another financial aspect you’ll want to think about before jumping into the homebuying process is how much you have saved up to make a down payment on a house. Experts consider a 20% down payment to be ideal when buying a house.
2. Know how much house you can afford
Once you have a better idea of the kind of financing you’re eligible for and the down payment you can afford, it’s time to think about “how much house can I afford” in general. Comparing monthly mortgage payments over time with your income and other expenses will give you a good idea of what your monthly budgets will look like for the years to come, and show you how long you might expect to be paying your house off until you’ll own it outright.
Of course, you don’t want to be living life solely to pay off your mortgage, so be sure to work within the means of your budget when buying a house. Being unable to make mortgage payments could put you in a really tricky financial situation and blemish your credit history for years to come.
3. Base your wishlist on budget and long-term goals
When you imagined the homebuying process, you probably envisioned open houses and bathroom dreams more than coordinating with mortgage lenders and crunching numbers, but the truth is both steps are important to the process. Now that you know your budgetary limitations, you’ll be better suited to create a realistic wishlist for your dream home.
In addition to taking your budget into consideration, you should also think about your long-term goals as a homeowner. Remember, buying a house is a big investment, so you’ll want to make it worth your while. If you want to have kids in the near future or grow your family, shopping for a house with spare bedrooms and ample yard space may make more sense in the long-term than buying a small townhouse.
4. Enjoy the process
Although new and sometimes overwhelming, the homebuying process should also be an enjoyable one. As you make serious financial and lifestyle decisions during these weeks and months, make sure to stop and smell the roses, admire the curb appeal, and dream up your home goals.
Are you ready to take on home buying? Share your excitement, questions, and concerns with us in the comment section below!