Everyone knows that buying a brand new home for the first time can be daunting to say the least. The challenges that someone new to the market faces may seem endless. The decision to buy a home is one of the largest decisions that most people will face in their lifetime. In an effort to take some of the sting out of the process several people within the industry have compiled some suggestions to assist first time homebuyers.
Know what you can spend
A first time homebuyer needs to know exactly how much you can afford to spend on a home. This will save you a lot of time and headaches. There are two ways to figure out where you are in the housing shopping market. One way is to ask your Realtor to do a quick calculation based upon general numbers that you provide to them. The other is to choose a lending bank and get prequalified for a home loan. A Realtor will be able to give you a close estimate of what you can afford, while getting prequalified will give you the exact amount that you qualify for. Getting prequalified by a bank will require you to provide all the documentation needed to actually obtain the loan and will be based upon your total earnings, total expenses, and credit score.
Get your finances in order
Since the housing market crashed banks and lending institutions are requiring extensive documentation of all of your financial records. The best way to explain it is that you will need to provide written proof of every penny coming in and going out. The less that you have going out the better. Paying down existing credit cards and personal loans will not only help you qualify for a larger home but it may reduce the rate of the loan being offered to you. A percentage of a percentage point reduction at closing can save you thousands of dollars over the life of the loan. Be sure to check all three major credit reporting agencies for any inaccuracies and correct any that are present. Try to settle any debts that are in arrears or in collections. It may cost you some money to settle these kinds of accounts, but having these derogatory items in your credit history could cause your initial interest rate on a mortgage to be higher thus costing you thousands of dollars over a 30 year period.
Many housing economist believe that we are in a buyers’ market right now. Home prices have never been lower and interest rates are more than favorable. Preparation is the key to making you’re your first purchase a pleasurable experience. There are an untold amount of people willing to help you along your journey. Choose professionals that are certified and accredited and never give out your personal information unless you have checked their credentials.
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Nice post.Thanks for sharing the information.You have to maintain a balance between your expenses.
I’m on my way to buy my first home, and at this point I’m really undecided if I should wait for prices to get lower or to buy immediately. I know that it’s a risk that I have to take, but I have to be wise about this, because I’ll spend my future 30 year paying for a house.
Mia, I would say that you have to do what’s best for you. Personally, I think that by locking into today’s historically low rates, you can buy MORE house than if you wait for prices to dip slightly (that’s assuming that it WILL dip).
^^^Agree!
Think long term! You can’t beat these low interest rates and home prices might decline slightly, but i don’t think they will decline a significant amount. Well, not low enough to “wait” to buy.
Great tips. Know what you can spend is important because a buyer can be looking at homes they can’t afford and will be disappointed when they can’t get it.
Hi Paul,
I need to sell my apartment and buy one near where my father lives. He has Parkinsons so I want to go stay near him. Selling and buying is really stressful… I wish I had a really good realtor that I could trust and would help me on this process. Thankfully I don’t have credit card debt so that won’t be a problem in the equation.
Thanks for your tips,
Eren