10 Best Tips for a First Time Home Buyer
Many first time home buyers get caught up in a circle of low income, increasing property prices and then made worse by the very tight availability of credit.
In market conditions such as these, any helpful information that potential first time home buyers could use can make a big difference.
This article aims to empower first time home buyers to pay less for the home they want and with the little amount of stress to them.
As such we have compiled several tips that can really help the potential first time home buyers to navigate the property market the correct way.
Below are the home buying tips for first time home buyers.
1. Look for first time home buyer grants
Because homeownership is beneficial for the country’s economy, the government tries to encourage homeownership by issuing government grants to first time home buyers.
As a first time home buyer you don’t have to pay back the grant you receive - it’s all free.
There are several types of grants available to first time home buyers.
Governments provide first time home buyers grants through local, state and federal agencies. There are also grants offered through housing and charitable foundations nationwide.
So as a new buyer it’s your task to do a thorough research and find the best first time home buyers grant available to you.
2. Know what you will afford
When you decide to buy your first house, make sure that you calculate the amount of money you will afford for down payments and for monthly mortgage repayments.
Most people start by making small incremental savings to cover for their down payments and transfer costs. This is a smart thing to do.
As a first time home buyer you will need to work out your finances in such a way that you are not left with a heavy burden once you start making those monthly mortgage repayments.
It is important to calculate all the monthly payments and include things like homeowners association dues, homeowner’s insurance, insurance premiums and property taxes.
So try and calculate the total amount you will afford before starting the search for a house.
3. Save for the down payment
You need to calculate the potential down payment.
An average new home buyer requires around 20% of the total cost of buying a house available as a down payment.
This is usually the norm within the industry.
Down payments eases the credit burden for most first time home buyers.
This needs to be budgeted for. Make sure that the funds are available before you close.
As discussed above, there are other options that you can take advantage of such as government grants.
You should also take your time and look at various loan programs that are offered to different credit levels.
Some programs even loan a percentage of the down payment.
4. Find the best local property agents
As a first time home buyer It is always a great idea to work with an experienced property agent.
You will need to select the area where you want to buy a home and then connect with agents working in that area.
It is important to be with an agent who has done extensive work within that neighborhood. One that has insight into local matters like new developments, schools and even the best mortgage lenders.
5. Choose the right neighborhood
As first time home buyers, you will need to balance finding good neighbourhoods with property prices that you can afford.
To do this you need to know a lot about the areas where you intend to buy a home. To get a clear picture, make a list of all the selected neighborhoods.
You will need to take a drive through these neighborhoods at different times, including late evenings, weekends and commute times.
6. Get your credit in order
As a first time homebuyer you will also need to get your credit ready.
Buying a home will need a strong credit history, so be prepared.
To do this you will need to get your current credit reports and get any discrepancies fixed before approaching mortgage lenders.
7. Put a check on other credit purchases
8. Understand mortgage points
The difference between these two needs to be well understood.
With so many considerations when buying a home, the issue of mortgage points can be really confusing for a first time home buyer.
Mortgage points are a fee paid by a borrower to the lender in order for the lender to reduce the rate of interest on a mortgage. This is also called “buying down the rate.”
Each mortgage point will usually cost you 1% of the total mortgage amount. So one point on a $500 000 mortgage will cost you $5000.
9. Understand interest rates and lender’s requirements
You should understand where exactly you stand with lenders.
When your credit score is high, you will be able to get some low rates and also get a loan that is conventional.
Over the long run, high interest rates will affect you negatively.
10. Get your timing right
It may not be possible to always have perfect timing. Just look for a home that you will love. When you wait, you may miss out on low rates, a perfect home or low prices.
We hope that using these tips will assist first time home buyers make the right decisions and get ahead of the game.