If you're considering your first home purchase, you may feel like you have a massive task ahead of you. Although this is one of your biggest life decisions, it really boils down to three parts: learn the process, find an agent, and find your dream home.
Well, you're in the right place to find an agent! All of our agents are experts and love working with first-time homebuyers. We our agents to brainstorm the advice they think all first-time homebuyers should know. Here's what they said.
"Know how much you need to save, then save a little more."
The first step to buying a home is to save up a down payment. The amount needed varies depending on the price of the home you're looking to purchase. Some mortgage types allow you to put down as little as 3%, but the traditional down payment is as much as 20% of the purchase price.
The more money you are able to put down, the less you'll have to pay on interest overall. You'll also need to put down 20% if you want to avoid paying private mortgage insurance (which gets added into your mortgage until you've paid off 20%). So if you're focused on getting the best deal on your mortgage, you'll need to start saving as soon and as much as possible. More money down means paying less in the long run!
Keep in mind that you'll want a little added cushion for moving expenses, repairs, taxes, and closing costs, too. But the good news is, working with a buyer's agent is free!
"Do your research on mortgage programs."
As a first-time homebuyer, you may be able to qualify for loan programs or grants. Here are a few:
- USDA Loans (targeted toward homes purchased in rural areas)
- VA Loans (for veterans, surviving spouses and active-duty military personnel)
- First Front Door (contributes up to $5,000 in assistance for first-time buyers in the Pittsburgh area)
- FHA (require a lower minimum down payment and credit scores than many conventional loans )
- Good Neighbor Next Door (for police officers, school teachers, emergency responders, etc, moving into "revitalization areas")
Each of these programs will have specific income, credit score, down payment, and geographic requirements to qualify. Moral of the story? Do your homework and ask your agent what you might qualify for. This could save you thousands in the long run!
Even if you're going with a conventional mortgage, shop around to different lenders. Find a top-shelf financial institution or broker who is willing to help you make smart choices, meet deadlines, respond quickly to requests, and answer all of your questions.
"Check your credit before going to the bank."
There are a lot of mixed messages about what will and will not impact your credit score. But you are entitled to yearly reports from the three major credit bureaus, and there are free services like Credit Karma, which will not hurt your score to check.
Your credit score has a huge impact on your financing options and interest rates, which can affect you financially for years to come. Check your credit reports for any errors and get them fixed (this can take weeks) before applying for a loan. If your credit is lower than you'd like it to be, use this time to pay down debts, decrease your credit card usage, build your credit history, and make other smart choices to increase your score. The sooner you know your score, the more time you have to adapt and improve.
"Get mortgage pre-approval, not just pre-qualification."
They may sound similar, but pre-approval and pre-qualification are different.
Pre-qualification is a quick, easy process based on only a few points of information. Think of this as an estimate. You'll be able to get an idea of what kind of mortgage you'd qualify for - but it's not final or guaranteed.
Pre-approval is what sellers want to see. It means you've gone through the first thorough processes of getting an actual mortgage. Unless something significant changes with your financial situation, there's a good chance you'll actually be able to get the mortgage. Although the pre-approval process requires some paperwork, proof of income, and financial statements, it's absolutely necessary to have on hand in a competitive market. (And you'll have to do it at some point to get a mortgage, so start gathering your W2s, tax statements, and pay stubs sooner rather than later!)
"Put in the time to find an excellent agent."
Choosing a real estate agent is a big hiring decision. Meet with and interview agents until you find someone who meets all of your requirements - don't settle!
Ask serious questions such as:
- How long have you had your license? Are you full-time?
- How many homes have you bought and sold in the area?
- Can you tell me about your typical process for finding homes?
- Do you typically work in my price range?
- What other professionals can you recommend to me (lenders, inspectors, contractors, etc.)?
- How do you communicate with your clients?
- Will you provide me with at least 3 references?
Performing these interviews might seem like a lot of work, but at the end of the day, you know you're getting an agent you can trust. They will provide sound, well-versed advice and guidance to make sure you're making the smartest choices and getting the most out of your purchase.
The agents at Harvest Real Estate would be happy to answer any of your questions about buying your first home. Send us an email and we will let you know who would be your best match!