Congrats on being ready to buy your first house! If I look back at the process of buying our first home, there was so much that we didn't know that it's a miracle that everything all worked out. Here are some tips to help your through the home buying process (and impress your agent!).
1. Save, save, save!
It's never too early to start saving for your first home. While it is true that down payments are not required for all types of loans, there are other costs to consider.
Closing costs are the fees that you pay at closing to finalize your mortgage. You can expect to pay between 2% to 5% of your loan amount, but sometimes it can be negotiated to have the seller pay a portion of these costs and help you keep some of that hard-earned money in your pocket.
Depending on which loan you choose, you might have to provide a down payment in order to obtain a loan. Here are a few loan types to consider:
FHA loans typically require 3.5% down and are insured by the Federal Housing Administration.
USDA loans are for rural home buyers and usually don't require down payments as long as the property is located in an eligible area and you meet the requirements.
VA loans are reserved for active duty and veteran military service members and usually do not require a down payment.
Conventional loans typically require a 20% down payment, but there are some loans that offer 3% down payments to first-time buyers.
2. Decide on your home budget
Calculating how much you can afford to spend on a home is a critical piece of the puzzle. You will need to set a price range based on your income, any debt you have, how much you'll be contributing in a down payment, where you plan to live and your credit worthiness.
3. Get familiar with and build your credit
The overall health of your credit will effect several factors with your home loan. Lenders will look at your scores to determine your interest rate and whether or not you will qualify for the loan. Here are a few tips to consider to keep your credit score strong through the home buying process:
Know your score and watch it closely. Go online and get free copies of your credit reports form each of the credit bureaus (Equifax, Trans Union, and Experian). Be sure to dispute any errors that you find that could lower your scores.
Do not close any credit cards/accounts. Closing accounts or cards can actually lower your score because it can reduce your credit age (the average life of all your open accounts) and lower your available credit.
Pay your bills on time. You do not want late payments to show up on your report because 1 late payment could affect your score by up to 50 pts, also you should keep balances as low as possible during this time.
4. Get a pre-approval letter
A mortgage pre-approval provides documentation of exactly how much mortgage you have been approved to borrow. This document will confirm that you have budgeted for the right priced home and that the lender will more than likely approve the loan as long as it is at or below your pre-approval amount.
NOTE: Most lenders might offer to loan you more than what is affordable to you, this is why it is critical for you to examine your finances and set a budget and stick to it.
5. Find an Agent that you trust and that will fight for you
This is your first home and it's a huge life decision, so find an agent that you trust will give you honest information and that will always fight for your best interests. A great agent will be able to walk you through each step and explain the process so that you can make informed decisions that benefit you and your family. If you are in Georgia and need an agent, we would love to work with you, feel free to reach out via our contact page.