Buying a house is a big investment. For many people, it is the biggest purchase they will ever make. The whole process requires careful consideration. To ensure you do not experience buyer’s remorse, be prepared. Here are some first-time homebuyer tips you should know as you embark on the journey towards home ownership.
Don’t Worry about the Agent’s Commission
Many first-time homebuyers think they will have to pay a commission to the real estate agent when they buy the home. This is not the case. Don’t walk away from that home you’re thinking of buying because of the hefty commission you think you have to pay. Focus on saving for your down payment as the realtor will get their commission from the home seller.
Improve Your Credit Score
You may not know it, but you’ll pay lower monthly payments if you have a high credit score. Focus on having a credit score that’s not less than 700 as you’ll be sure to get a good deal. If your credit score is below 660, you’ll either have to pay a higher down payment or higher monthly payments.
Be sure to pull your credit reports and go through them to ensure you’re not getting penalized for paid or old debts. In addition, do not apply for a new credit card a year before you apply for financing.
Get a Home That’s Financially Comfortable for You
There are different ways to tell whether a home is financially comfortable for you. If you’re getting a traditional loan to pay for your new home, the house’s expenses must not exceed 28% of your monthly income (gross). If you’re getting an FHA loan, your monthly payments should not be more than 31% of your monthly income.
Concentrate on the Monthly Mortgage Payment
One common mistake most homebuyers make is to focus on a home’s total price instead of the monthly payments to be made. While you may be approved for a $250,000 home, you may not be able to afford the monthly payments. Your advisor will give you a range of what you can afford. Look at the range and work out what you are comfortable paying every month. Consult your advisor to make sure you understand how your credit, the mortgage rate, and the down payment amount will affect your monthly payments.
Save for the Down Payment and the Closing Costs
The down payment is usually between 3%-20% of the home’s price – it all depends on your credit score and the financing. You’ll also need to save for closing costs, regardless of your loan source. Closing costs may range from $2,300 to $4,000 for a $200,000 mortgage. You can search for your state’s average closing costs beforehand.
When buying your first home, it is very easy to get overwhelmed by all the decisions you have to make. However, there are some things you should prioritize more than others. Go through our first-time home buyer tips and you’ll steer clear of anxiety.