Are you looking to buy a home for the first time? We’ve got a checklist with helpful information to help make your home ownership dream a reality. First-time buyers often lack clear information about the home-buying process. This step-by-step guide can provide clarity and ease the ambiguity of the homeownership journey. Even if you’re not actively looking for a house, it helps to know what’s needed as early as now.
The steps involved in the home-buying process are:
Buying a home requires a hefty sum of money. It’s the biggest purchase most people make in their lifetimes, and without the cash for it, you'll need a mortgage loan. But to qualify for a loan, your finances must be in a good position. Your credit score is probably the most information for first-time home buyers to know.
Start by checking your credit scores and credit card reports. A high credit score of 760 or higher can get you favorable loan terms, and while a low score of 620 can also get you a loan, you will not get the best rates. Your mortgage loan may end up being very expensive. So, instead of applying for a mortgage loan early, work on your credit score to qualify for the better loan terms.
Here’s some more valuable first-time buyer information: Keep an eye on your credit report and look out for errors that could affect your credit scores negatively. A soft inquiry will let you have a look without damaging your credit scores.
Among the most critical pieces of information for first-time home buyers to note is the importance of a down payment. Lenders will want to know how much you have saved up as down payment when you approach them for a loan.
Mortgage loans have a minimum percentage down payment requirement, meaning that you’ve got to have a particular amount saved up to access the mortgage loan. So, as you plan to buy your first house, check to see how much you have down because often, a down payment is the biggest hurdle for would-be buyers.
An essential piece of information for first-time home buyers is the need to save some money for closing. Closing costs can be quite significant, ranging from 2-5 percent of the home’s purchasing price. Not having this amount can leave you stranded on closing day. So, as you save for the down payment, set aside some money for this too.
A first-time buyer information list would be incomplete without addressing the types of mortgages. Mortgage loans typically fall into two categories: adjustable-rate or fixed-rate mortgages. A fixed-rate mortgage has a constant interest rate with constant monthly repayments, but this rate is often slightly high. An adjustable-rate, on the other hand, is low in the beginning, and then starts varying, going by market changes.
The fixed-rate mortgage loans are more expensive but give the most stability, especially if you plan on staying in that house for a long time. But, if you plan on living in the house for only a few years, opt for the adjustable rate mortgage loan.
Another crucial piece of information for first-time home buyers is the loan term. A loan term is the length of time during which you will be paying the mortgage loan, such as 25 or 30 years. Short-term loans have significant monthly payments and lower rates, while long-term loans have higher rates and lower monthly payments. Decide on the loan terms that could work best for you. But, typically, first-time home buyers opt for a fixed-rate, 30-year mortgage.
Here’s another piece of essential first-time buyer information: Mortgage interest rates change often and vary across lenders. So, it’s best to compare offerings from at least three lenders. It’s easy to get a quote from their websites, but you will have to provide some personal information like the desired loan amount, credit score range, and your down payment amount. But first, check their website information to see if they have any special offers for first-time home buyers.
After saving for your down payment and building your credit score for some time, approach a lender for pre-approval. Pre-approval is a preliminary commitment the lender makes to loan you a specified amount. Although the offer is not finalized, the letter indicates how much you can qualify for, the loan program you’re using, and the expected down payment. Pre-approval sets you up for the market because sellers often do not consider offers unless they are in cash or backed with financing.
Armed with your financing or promise of financing, along with the previous information for first-time home buyers, you will be ready to get into the real estate market. Start by finding a real estate agent to walk you through the process. Let the agent know your budget and what you’re looking for. They will advise you regarding various properties on the market and help you make an offer when you find a good fit.
The journey toward owning a home in America is long, and it’s best to start it with the right information, so you know what’s ahead and what is expected of you. LendMeMoney offers credible information for first-time home buyers and links them to mortgage loan providers with the best loan terms. Contact us for more information and the best deals in America’s property market.
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