5 Tips for First-Time HomebuyersJuly 15, 2017
This post is sponsored. All opinions are mine alone.
Buying a single family home has been one of the biggest milestones of adulthood so far. There’s something really special about owning a chunk of land and being able to do anything with it. However, the process of selecting the home and financing it can be downright stressful. Here are some tips to consider for first-time homebuyers.
1. Consider all your financing options.
There are numerous financing options for first-time homeowners. This can be both a good thing and a bad thing. While it’s nice to have so many options, the sheer volume of decisions can be overwhelming at times.
In terms of first-time homebuyer loan types, you have three options:
- Conventional Loan — This loan is a fixed-rate mortgage that isn’t guaranteed by the federal government. While it’s the hardest to qualify for because of its qualifications (credit score, income and down payment), specific associated costs tend to be lower compared to some guaranteed mortgages.
- FHA Loan — A Federal Housing Administration loan offers different mortgage loan programs, has lower down payment requirements & upfront loan costs and is typically easier to qualify for than a conventional loan.
- VA Loan — The U.S. Department of Veterans Affairs doesn’t create loans as an organization, but it does promise mortgages prepared by qualified lenders. Only veterans and service people can get these loans, so if you fall into one of those categories, this could be a good option for you because you receive advantageous terms, i.e. no down payment and easier loan qualifications.
As you consider all your financing options, keep in mind that your personal finances and the geographic market can help dictate which loan type might be most beneficial for you.
2. Have all your paperwork for the lender ready beforehand.
One of the most tedious but necessary parts of becoming a homeowner is supplying lenders with all the needed paperwork. Save yourself some hassle and get your documents ready beforehand. Some of the documents that you’ll definitely need to fork over include: bank statements from the previous two months, recent pay stubs, W-2s from the previous two years, tax returns from the last two years, proof of identification, sources of funds/assets, and proof of credit/debt history.
3. Know the difference between your must-haves and nice-to-haves.
There are features you want and there are features you need in your first home. When you are browsing through homes, you may find that you fall in love with a particular home due to something superficial, such as the amazing decor inside the home, for example. It’s important for first-time homebuyers to focus on the big picture and try to define the essential qualities they are looking for in a new home. Maybe it’s the location of the home, maybe it’s the number of bedrooms, or maybe it’s something else entirely. Keep these must-haves in mind as you start to visit properties and don’t be unduly swayed by features that don’t really mean that much to you in the long run. In fact, it’s a good idea to keep a checklist of your must-haves and every time you walk through a new home, consult your list to see whether this particular property is a good fit.
4. Inspect the neighborhood.
There are five major things to be aware of with the neighborhoods you look at. Some of these you may already be familiar with, but as a first-time homebuyer, you may not have realized the importance of all of these:
- Prices of Other Homes — Once you find a home you like, check out what other homes in the area have recently sold for or are currently listed at. It’s important to make sure that the home you’re considering is fairly priced.
- Property Taxes — This is something you have to pay, but don’t let the neighborhood property tax amount surprise you. Find out beforehand how much it’s going to be, so you can figure out if the annual amount fits into your budget.
- Neighborhood Demographics — If you’re single, do you want to move into a neighborhood full of families? If you have a family of four, do you want to live in a neighborhood that’s half college-aged renters? Learn as much as you can about the neighborhood because even if you love the house, the neighborhood can be a real deal breaker.
- School Districts — Even if you don’t have kids, the quality of nearby schools affects real estate prices. There’s consumer demand for living in a good school district, and this demand will drive prices up for real estate and property value, which is definiely good news when you want to sell.
- Neighborhood Building Plans — Before buying your home find out what the near-future building plans are. You don’t want to buy your perfect home, only to learn that a few months after moving in, the neighborhood is building a new playground right next door to your house.
5. Be a long-term investor.
A home is a big investment, and one most people want to last them for several years. You can’t just focus on your personal situation now; you have to look into where you’ll be down the road. If you plan on having kids, will a three-bedroom house still fit you comfortably in five or 10 years? If you only want to live in this house for a few years, is it a good neighborhood with good schools that will increase your property’s selling value? Keep these kinds of questions in mind as you hunt for houses.
I hope these tips have helped prepare you for your house-hunting process. Now, tell me: If you’re already a homeowner, what is your best tip for first time buyers? If you’re currently looking for your first place, what is the most stressful part of the process for you?
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These are great tips! One other one I’d suggest is watching the market. I bought at the height of the bubble and seven years later ended up doing a shortsale because I had to move, couldn’t find a quality renter and lost over $50k value. I wouldn’t let it stop me from buying again, but I would definitely be more cautious as to when I bought.
Before kids, I probably never would’ve considered checking out school districts before buying a house. Great tip!
These are all great tips for first time home buyers!! I am hopefully about to be a first time home seller and I can’t wait!!
We have been looking at all of the loan options lately. It can be really overwhelming! This is good information.
Thanks for these tips. Buying a house is a huge investment of our hard earned money so we really have to do our research before we finally decide on buying that dream house.
Those are great tips. I would also add that you can negotiate the interest rate on your mortgage loan. I did that when I bought my first home.
Great tips! Should be sharing it with my mom and step-dad. Uhmm I live with them. Thank you.
Great tips for first time homebuyers! I recently bought my first home and there were so many things to consider!
I also called around for the best interest rate on my pre-approval. My bank also helped me file for first time home owners credit which was what I used for the closing costs.
These are great tips. I’ve never bought a home and don’t think I will for a while. However, I know it doesn’t hurt to be educated on the process well beforehand.
These are all incredible tips. My boyfriend and I are renting right now, but in the next few years we know we’ll be taking the next steps and look at buying a home! I think the rules and financing things are a bit different in Canada, but it’s pretty much the same concept!
There is so much to know when buying a home. I definitely have regrets from not checking a few things out when we first bought. But we’re in a great neighborhood now.
When we bought our house, I wish I had this to look at. I really had no idea what we were doing.
Purchasing home for the first time is really a stressful task and without a proper guidance, you can’t make it. Thanks for sharing some useful tips.
This is so helpful! I’ve never owned a home. So, I didn’t know a lot of the things you explained. I’m hoping I can finally buy a home after I finish grad school, and this will come in very handy. Thanks!
Looking to buy your dream house? If yes then just prepare yourself with the real estate information you need. Many a time you will get stuck with too many questions, but you need to focus on your exact requirement. Here are some important questions you need to ask builder or the real estate agent before finalizing the house.
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