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First-Time Homebuyer Guide: How To Buy a Home

Use this post as a resource to guide you through the homebuying process. Image source: Candlelight Homes

Many consider the decision to buy a home one of life’s biggest milestones. Becoming a first-time homeowner requires a significant investment of both time and money, so it’s only natural to want to do your research before jumping in.

If you have questions about the homebuying process, look no further. We’ve compiled a comprehensive guide detailing what first-time homebuyers can expect as they negotiate the real estate market. Use this as a resource, and before you know it you’ll be sending out change of address cards.

Before You Start Looking for your First Home

Take a Look at Your Finances

You’ll need to examine your finances and get them in the best shape possible before applying for a loan. Remember, the better you look financially, the better position you’ll be in when it comes to having your offer accepted. Here’s what you can do:

  • Develop a budget. Make a list of your monthly expenses, even the little ones. Create a budget that allows you to live below your means, and stick to it.
  • Reduce your debt. Banks understand that everyone carries debt, but in order to be seen as readily financeable, they prefer that cost take up no more than 10 percent of your monthly income.
  • Build your savings. When you buy a house, you’ll be expected to make a down payment on the property (typically 20 percent of the purchase price). There are also initial deposits, inspection fees and closing costs to consider.
  • Pay your bills on time. You should also pay as far above the minimum payment as possible. It’s a red flag to banks if they feel you are inconsistent when paying smaller bills.

Getting your finances in good shape may take some time and effort, but it’ll be worth it when you and your family are able to finance your dream home.

Research Mortgages

The idea of applying for a mortgage, especially if you’re a first-time homebuyer, can be overwhelming. There are so many types to consider. Chase Mortgage outlines the most common ones:

  • Fixed-rate mortgage. The interest rate will stay the same for the entire length of the loan, meaning that your payments will be consistent no matter how the market fluctuates.
  • Adjustable-rate mortgage. This type of loan has a lower initial interest rate than a fixed-rate mortgage, meaning that buyers may get approved for a larger sale price. After a few years, however, your loan will be subject to periodic adjustments based on the current market.
  • Government loan. These loans are offered by private lenders but insured by the federal government.
    • FHA loan: The Federal Housing Administration aims to help low- to moderate-income buyers by offering low down-payment requirements and flexible qualifying guidelines.
    • VA loan: This has many of the benefits of an FHA loan but is backed by the Department of Veterans Affairs. It is available only to veterans or active-duty military personnel and their spouses.

In addition to the type of loan you prefer, you’ll want to have an idea of the length of loan that will work for you. Typically, mortgage terms are 30 years, but there are options available ranging from 10 to 40 years. Longer-term loans often come with lower monthly payments, whereas shorter-term ones will likely offer better interest rates.

Don’t worry too much about deciding upon the exact type of loan that you’d prefer. A qualified loan officer should be able to make recommendations for you after reviewing your financial information. Just focus on familiarizing yourself with the options available so that you can make educated decisions when the time comes.

Get Preapproved For a Loan

The next step is to bring your financial information to a mortgage company and ask for a preapproval. Keep in mind that a preapproval is not the same thing as a prequalification, which generally only estimates what you can borrow. In contrast, a preapproval involves a thorough credit check and in-depth look into your finances.

In the end, you’ll get a written commitment letter with the amount that the mortgage company is willing to lend you. It will give you a much more accurate picture of what you can afford.

It’s also important to remember that your preapproval will show the maximum amount that you can borrow based on your finances. You do not have to buy a house at that price point. Instead, we recommend that you look at your budget and decide upon a monthly mortgage payment range that will allow you to comfortably afford your other monthly expenses.

Hire a Real Estate Agent

At the end of the day, buying a home is a legally binding transaction. While hiring an agent is not required, it only makes sense that you would want someone on your side of the settlement table who is invested in representing your interests. A qualified agent will also take care of coordinating any logistics during the showing process and guiding you through paperwork so that you’re able to focus on identifying your new home.

By no means should you choose just any agent. Do your research and interview a few with good reputations in your area. Before signing a contract, you should feel confident that you’ve found a real estate agent who will be able to listen to your needs and translate them into results.

Take the time to get your finances in order before entering the housing market.

Determine the features that are most important to you before you start your home search. Image source: Bergeron Custom Homes, LLC

Finding Your First Home

Set Search Parameters

One of the first things you’ll do with your agent is sit down together and talk about the type of home you’d like to buy. This will help both you and your agent focus on what’s most important to you in a property. We recommend coming to this meeting with two lists in hand: a must-have list and a wish list.

As the name suggests, your must-have list should be comprised of the non-negotiable features that need to be present in order for …read more      

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