If you never bought a home before, read our “4 Things First-Time Home Buyers Should Do”. You will learn secrets shared by experts to make your quest easier.
KEY TAKEAWAYS
- Learn the 4 things first-time homebuyers should do.
- How to prepare to buy your first home.
- Find out how to find the right home.
- How to select the best mortgage.
- Pre-closing home purchasing tips
4 Things First-Time Home Buyers Should Do
Look at buying your first home as a project. Follow our tips to navigate the home buying process to save money and close the deal. Read our four categories of home buying procedures:
- How to prepare to buy tips;
- Tips for Finding the Right Home
- Selecting the best mortgage tips; and
- Home purchasing tips.
1. How to Prepare to Buy Your First Home Tips
Start Saving Now
Consider these three important costs to save for when buying your first home:
Down payment: A down payment depends on the lender and type of mortgage you pick. Some first-time home buyers’ conventional mortgages allow only a 3% down payment for buyers with excellent credit. Yet, a 3% down payment on a $350,000 home is $10,500. Check out a free online down payment calculator to establish your goals based on what you can afford.
Closing costs: All the fees and expenses you must pay to buy a home including mortgage and escrow closing costs. Normally, these costs range from 2% to 5% of the mortgage amount. You can negotiate with the seller to pay some of your closing costs, but that only works during a slow seller’s market. Save some expenses like shopping around for a low-cost home inspection.
Moving-in expenses: You still need cash after you finalize your home purchase. Save money for furnishings and home repairs along with your typical moving expenses.
Check Your Credit Report and Strengthen Your Credit Score
The first thing lenders look at when applying for a mortgage is the credit score which ranks your credit history into a three-number score between 300 to 850. Your credit history includes how many credit accounts are open, your total debt, repayment history, and other information. Your credit score tells lenders what probability you can repay your loan on time.
You can get a free copy of your credit report from each of the three credit bureaus:
- Equifax;
- Experian; and
- TransUnion.
Tip: If you find an error, you have the right to file a dispute claim to fix it. This will result in a higher credit score enabling you to get a loan easier at a lower interest rate.
2. Tips for Finding the Right Home
Choose an Experienced Realtor Carefully
Find an experienced Realtor who knows the local market in the area you want to move to. Cities and neighborhoods vary greatly requiring finding the right Realtor. Notice how we emphasize Realtor than real estate agent? There is a difference. View our blog post about the difference titled: “Is a Realtor Better Than a Real Estate Agent?”
Your Realtor can help you find the perfect home at the best price while negotiating with the seller over the best terms and contingencies. Read about contingencies: “What are Real Estate Contingencies in California?”
Contact us now so one of our experienced Realtors can help you find your ideal home in the greater San Diego area.
Choosing the Right Neighborhood and House
You will find a wide variety of types of homes available. Your budget and lifestyle may determine if you buy a condominium, townhouse, or single-family home. Sharing walls with neighbors you don’t know and lack of privacy may be important to you. Likewise, dealing with a homeowner’s association rules and regulations and monthly dues with shared amenities may not appeal to your lifestyle.
Your budget might require looking at fixer-uppers where a single-family home in need of repairs sells for less. Of course, you must budget for the repairs and lost time getting the home ready to move in. You can find renovation mortgages to finance the purchase price and improvement costs.
Do you want a starter home or a forever home? If you plan to enlarge your family then buying a home with extra room to grow makes sense.
Research your potential neighborhood carefully. Look at the crime rates and types of common crimes. Test your commute times going to and returning from work. Will rush hours inconvenience you? Check out nearby public transportation and amenities. Can you easily walk to parks, essential shopping, nice restaurants, and entertainment venues? How about nearby parking? Will your guests have to drive around looking for parking?
Don’t Rely on Virtual Tours
Don’t depend on photos and 3D virtual tours. While these props can help you narrow the list of potential homes to buy, you need to see them for yourself.
Go to open houses and make appointments to preview homes to see, smell, and feel what the home is like. A house staged looking good on film may contain unwelcome surprises when you visit.
Have questions?
3. Tips for Selecting the Best Mortgage
A home loan (mortgage) amount and fees vary by location and the purchase price minus the down payment. You must figure out how much you can afford before looking for a home. Check out this free online home affordability calculator which sets a price range based on your down payment, debts, income, location, and credit score.
When looking for a mortgage lender you will find many options. Not only in lenders but also in types of mortgages depending on how high a down payment you make and eligibility requirements. Here are the main types of mortgages:
- FHA loans: The Federal Housing Administration (FHA) insures mortgages and allows down payments as low as 3.5%;
- USDA loans: The U.S. Department of Agriculture (USDA) guarantees USDA loans for rural homes and doesn’t require a down payment;
- VA loans: The Department of Veterans Affairs (VA) guarantees loans for current and veteran military service members typically with no down payment; and
- Conventional mortgages: While not guaranteed by the government, there are conventional mortgages for first-time homebuyers with down payments as low as 3%.
Tip: Most homebuyers choose a 30-year fixed-rate mortgage which locks in the interest rate for 30 years when the mortgage is paid off. The other option is a 15-year mortgage with a lower interest rate, but higher monthly payment. Check out this free online calculator comparing a 30-year with a 15-year mortgage.
Bonus: Look into first-time home buyer’s assistance programs available in most states and some cities. Most offer down payment assistance and low-interest rates. View this post explaining “First-Time Homebuyer Programs in California”.
Also, look up your state to see what types of first-time home buyers’ programs exist.
Learn more about mortgage rates and fees along with the importance of getting a lender’s mortgage pre-approval letter by viewing our post titled: “Financing Tips for First Time Home Buyers”.
4. Home Purchasing Tips
Get Your Own Home Inspection
While most lenders order a home inspection, they are conducted to protect the lender, not you. Lenders worry about buyers who fail to make all the loan payments forcing the lender to foreclose and sell the house to recoup losses. Thus, their inspections focus on building structures in case of foreclosure and sale.
It’s worth it to pay for your own home inspection to make sure the inspector thoroughly inspects everything from top to bottom, inside and outside.
Negotiate with the Seller
If the home inspection reveals problems requiring repairs you have options:
- You can walk away from the purchase; or
- Negotiate with the seller to request advance repairs before the closing; or
- Ask for a lower price covering the repair costs you will supervise after you take possession.
Local market conditions factor into your negotiation power. In a hot seller’s market, the seller may find buyers who don’t require the seller to pay for minor repairs. Consult with your Realtor to know market conditions and strategize accordingly.
Negotiating with sellers is tricky. A mistake can cost you $ thousands. It’s better to use an experienced Realtor trained in negotiation strategies to get the lowest price and favorable terms for you. Contact us at Big Block Realty so one of our Realtors can he,p you throughout the entire home purchase process.
Consider Higher Home Insurance
Lenders require buyers to pay for standard home insurance before the closing. Standard home insurance pays for the repairs or replacement of your belongings and the home if they are damaged by covered incidents in the policy. They also include liability insurance covering your responsibility for accidents or injuries to others.
Yet, you may want extra insurance coverage like rebuilding your home instead of replacing based on the original value instead of future higher values. Also, the liability coverage might be too low for death or serious injuries to others.
4 Things First-Time Home Buyers Should Do – Conclusion
These are the 4 things first-time homebuyers should do:
- Prepare to buy your first home tips;
- How to find the right home tips;
- How to select the best mortgage tips; and
- Pre-closing home purchasing tips.
Also, read our blog post to learn more about “How to Avoid First-Time Home Buyer Mistakes”.
Plus, our post about “How To Successfully Buy A Home”.
Looking to Buy a Home in San Diego?
Big Block Realty not only publishes useful blog posts to help homebuyers. We also provide experienced Realtors to help you find the ideal home in the greater San Diego area.
Contact us now before you begin your search for a new home in San Diego County.
Steven Rich, MBA – Guest Blogger
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Steven Rich, MBA has been involved in the real estate industry for over 30 years. As an investor, real estate agent, associate editor of a real estate magazine, a real estate marketing expert, a Wikipedia real estate article author, and as a writer.
