For many, there’s nothing more exciting than buying your first home. Being a homeowner is the ultimate rite-of-passage into a world full of adult responsibilities, and to many it is the ultimate goal. Buy a home can be a daunting prospect – it is a long-term commitment. Most people have heard horror stories, such as home sales falling through at the last minute – even up to the day of closing – or a beautiful house turning out to be a money pit. How can you make sure that something like that doesn’t happen to you? You can’t plan for every contingency, but do everything in your power to avoid those sorts of problems simply by arming yourself with knowledge beforehand.
Here are some things to know as a first-time home buyer that can help you avoid some of the worst pitfalls.
Clear Your Credit Now
The biggest barrier that prevents most people from even being able to consider buying a house is their credit score. If you’ve not given much thought to your credit up until this point, it’s time you take a good look at it now. That number for your credit score has serious ramifications on what is and isn’t possible. A high credit score can open many doors, and can make home ownership both possible and affordable.
The good news is that it’s easy to check your credit score. Many banks offer free credit reporting for their customers, and there are other services that allow you to see your current credit score and investigate what factors might be having an impact.
Things like the number of accounts you own and the total amount of debt you currently carry can play a big role in whether a financial institution will be willing/able to lend to you. Monitoring your credit lets you see where you stand, and lets you fix any mistakes or problems that your report might show before you begin the process for a home purchase.
Find a Mortgage Before You Find a House
After deciding to buy a house, many first-time buyers make the mistake of house-hunting right away, before they’ve actually secured a mortgage offer from a lending institution. This is a mistake for several reasons. First, they run the risk of looking for houses that are out of their price range. Not only is this a waste of time; it also makes for great disappointment later. Imagine, finding the perfect house, only to realize later than you can’t afford it! Securing your funding in advance will help to avoid this kind of heartbreak. A second reason to get a mortgage before you shop is because no offer on a home will be taken seriously without a mortgage letter in hand, stating that the prospective buyer actually has the money to pay for it. Until that happens, any other offer with an actual mortgage lender behind it will be considered and accepted first. The third reason to get the mortgage secured first is that it can take time to get through that process. Many documents have to be collected and sent in, and underwriters and other deciders need to review all of the information before deciding whether to extend a mortgage offer, and for much. This can all take time (a few months is not rare) – time that could mean the difference between having an offer considered or rejected.
Think About a Down Payment
Another financial question to consider is the down payment. How much money are you able to save up in the amount of time you have available to you? How much you actually need can depend on which loan program you go through. A regular bank is most likely going to require a down payment of some sort (although the old-fashioned requirement of 20% down is no longer the industry norm). Some programs, though, such as VA Mortgages or USDA Mortgages can offer customers the possibility of no-down payment loans, which can make home ownership a much easier proposition for many people.
Make Sure You Will Have Money Left Over
Between paying the down payment, discount points and other possible fees, it’s easy to leave the closing with zero money left in the bank. Don’t let that happen! After you move in you’re going to find dozens of things you might need to buy, from light bulbs to new locks, and having a little extra set aside is going to be extremely helpful.
Consider Purchasing a Home Warranty
Early on in the process of making an offer and negotiating terms, it’s vital to request that the seller purchase a home warranty. Even with a thorough home inspection coming back clean, chances are good that something in the house is going to break after you move in, and the peace of mind that comes with a full-coverage home warranty can not be understated. NOTE: If a Home Warranty is not available, then you can consider adding insurance for your home equipment and infrastructure. We have information about this at the link below:
If you are interested in buying a home and need more information about how we can help with your insurance needs, please contact us today!