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Buying your first home is so exciting and overwhelming. The right agent helps you understand the whole process along the way and gives you advice and knowledge as you navigate this purchase. A lot of agents love working with first-time homebuyers because of the anticipation, excitement, and how meaningful it can be. So, how can you prepare yourself as a first-time homebuyer so your agent can best assist you in the process? Let’s look at some of the most common points of advice for first-time buyers.
First Time Homebuyers
Assess Your Debt
You will be working with a lender on your preapproval and you need to be able to show that you can handle your existing debt as well as the potential mortgage payment. Lenders will look at your debt-to-income ratio to determine if you can qualify. You typically want to keep your debt at 30% of your gross monthly income. If you need to pay down your debt first, then do so before completing your mortgage application. Pay down your credit cards, car loans, student loans, or any other existing debts. The more debt you pay off the better you look for your mortgage approval and the less stress you have each month when you are making your payment.
Your Credit
Having the highest credit score you can is the best way to go. The better your score, the lower your interest rate. Check your credit before doing a mortgage application and make sure you get any errors corrected. You can boost your credit score by paying down your debts and making sure you are in good standing. Most lenders are looking for a score of at least 620. A lower score will require a higher down payment a higher score will lessen the amount needed as a downpayment.
Your Budget
Always keep your budget in mind. This includes more than just the mortgage costs. As a homeowner, there are additional bills and maintenance that come with the homeownership territory. Some of these include property taxes, homeowners insurance, and home maintenance.
Additional: Before House-Hunting: A First-Time Buyer’s Checklist
Down Payment
As we touched base on above, the down payment is a huge determining factor in the type of mortgage you get approved for. A typical down payment ranges from 3.5% to 20%. With a higher down payment, you are a lower risk to lenders and can avoid paying a PMI (private mortgage insurance). Meet with a loan officer to explore your options as you determine how much to put down.
Get Preapproved
When all is ready then it’s time to get preapproved. This is when you will find out exactly how much you can borrow and how much you can afford as your home purchase price. You are now a ready buyer!
The Type of Home You Want
Now it’s time to consider what type of home you want while considering your budget. Single-family homes are the most common home type. Duplexes are two homes with separate entrances in the same building. Condos are privately owned units in a development. Townhomes are multistory dwellings side by side and owners own the interior and exterior. Take time to review what is available in your area, considering your desires and budget. Once you have narrowed down the type of home you would like then visit and research several neighborhoods to see what it would be like living in certain places.
Are you ready for your first home?
Going through all the ins and outs of home buying and the financial process can help determine if now is a good time to buy. Markets all over the country are doing different things so the timing in your area may or may not be right. Talk to a local real estate agent for more information on your current market.
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