Buying your first home can be one of the most rewarding yet stressful experiences of your life. There are several factors that come into play when starting the search. It is paramount to have your affairs in order before moving alone in the process.
First and foremost: Your finances. If you don’t have a very colorful credit score, you may want to way a little while before you’re thinking of purchasing a home. With a score below 750 and especially 700, you may not get a very intriguing rate with your mortgage. Take time to build your credit if it isn’t already established.
Once your credit is in line, you should have at least 10% down payment on hand—meaning 10% of the value of the home, in cash. With FHA, VA and USDA loans becoming increasingly popular, it’s lower down payments have been a highly utilized strategy. However, with these low down payments come a high interest rates. Ideally, if you have over 10% down payment you will get a fairly decent interest rate for your mortgage. Moreover, with today's economy, there is a strong demand for homes with a plethora of buyers.
Most home investors and serial buyers know this: save as much money as you can for hidden costs. Taxes, insurance, repairs and other miscellaneous expenses can rip an unexpected and gaping hole in your wallet. Make a plan to save a certain percentage of your monthly savings to “miscellaneous home expenses.”
Once you have your money lined up and have a financial plan of attack, it’s time to see what you can feasibly get pre-approved for mortgage-wise. Explore various options and not just the most popular choices at your local bank. Ask around. Ask your Realtor or family and friends what they’ve used in the past.
At this step, you know where you are financially and what you can feasibly afford for you and your family. Now, what location do you want to live in? Do you have kids? Look around for the right school district for you. Maybe you want to live close to work. Determine good locations and research, research, research. What is the history of property values in these areas? What about property taxes? Do your homework.
Now, here comes to trickier, yet fun part: Make an offer. Start low. Stay rational. Don’t start off your home search with a grueling and never-ending bidding war. Stay rational with your offer and stay focused. Practical discussions and reasoning will prevail in negotiating price with the other party. Don’t offer $400,000 for a house worth well over $500,000. You won’t end up with the house. You’ll just end up annoying the other party and losing to a high bid.
While there are dozens of other pivotal tips to begin the exciting home purchasing process, we think these will get you off on the right track. Contact us today to learn more on how to begin your incredible journey!