You did it!
Yes! You took the first step and made the decision to go for it and buy your first home! This journey is already a major move that can be filled with anxiety-ridden choices to make, especially for first-time buyers. In what can seem like an overwhelming process, asking yourself these questions (and analyzing the answers), may be able to help you avoid some pitfall mistakes that are common for first-time buyers
1. What are my down payment options?
The biggest headache for so many first-time buyers is the down payment. If you’ve ever bought a car, then you’re probably familiar with the concept -- it’s money that you contribute to the total cost of the purchase.
A down payment of just a couple thousand dollars can get you a head start on getting your future home. If you don’t have a certain amount to put down on your home loan, however, you might find yourself paying private mortgage insurance (PMI) for the lifetime of the loan.
Depending on your credit score, the bank, and other factors, PMI could cost between 0.5 percent to 1 percent of the total loan amount.
Most banks require at least a 20 percent down payment before they will waive the need for PMI on the loan. And most homes in this area cost about $300,000, so that means a buyer would need to bring $60,000 to the table in order to avoid PMI.
Some government organizations and lenders try to incentivize first-time homeownership by offering free down payment grants or loans to qualified buyers. Depending on your age, income level, credit score, and other factors, you could qualify for free money to wrap into your down payment; Check out downpaymentresource.com for a full rundown of programs you may qualify for!
2. Am I prequalified for a loan?
Before you try to D-I-Y and check on an online calculator. Don’t! Between the amount of money you plan to put down on the home, the potential PMI, and other cost factors, your monthly cost could be significantly more (or possibly even less) than some of those calculators will show you.
So before you trust those “estimated monthly mortgage loan amount” numbers that you see popping up next to your potential new dream home on Zillow or a brokerage website, it pays to figure out what you can actually afford -- and that means getting prequalified for a home loan.
The next step in this adult decision means you will need to talk to a mortgage loan officer and gather and submit a lot of documentation (from your monthly pay stub to your credit score) in order for that loan officer to tell you how much money you can get for your home loan. It’s a little bit painful (yes, you have to face yourself and your real-life finances), but the prequalification letter you’ll get is much more credible and will actually help you in the process. That means sellers will take it more seriously when it comes time to put in an offer!
3. Do I have a qualified real estate agent?
It can seem super easy to find homes online and do the whole buy-a-home process yourself but why take that chance? Do you know what you are doing? Do you know the lingo? Do you know the red-hot market in your preferred area with the updated listings? Do you know if your dream home is still up for sale or has it already been sold off by the time you sign up for a tour? Zillow does a lot, but not that much!
Guys and gals, let us allow the professionals to do what they are good at - finding you your new home in an amazing neighborhood, and (best of all) within your budget.
Not only can an agent make sure you have access to listings the second they hit the MLS (multiple listing service), but a qualified agent should also provide expertise on the area where you want to move (they can tell you what the best restaurant is down the street to where the best school is for your child). From giving feedback on who can help you with homeowners’ insurance quotes to warnings about some of the frequent pitfalls of owning a home in that neighborhood, in particular, a qualified agent is one of the best resources to have in the home-buying process
4. What is the neighborhood like after dark?
Now, this is an interesting thought because though it seems it should be common, it's not often thought of. What is it actually like in every day-to-day life on the block? Not just during the prime-time hours of the day when there is a tour, but what are the people who have been there already really like?
A pro tip we like to give out is that if at all possible, find a way to spend a few days in your preferred neighborhood where you are looking to buy. See if you can find an Airbnb or another rental type of setup where you can crash for a night or two -- preferably closer to a week -- so you can try your new neighborhood out.
Is an 8 a.m. arrival time at work still reasonable with this neighborhood’s commute?
Where are the closest grocery stores, parks, rec centers, and hiking trails?
What are the overnight noise levels? If there’s a train that rolls through town in the early hours of the morning, you’re near a highway or a flight path -- and any of that is going to disturb you -- then it’s best to figure it out before you’re spending your first night in your new home and wake up to unpleasant (and unexpected) noises.
At the very least, you can learn enough about the neighborhood to know how close to (or far away from) the bus line you need or want to be and target your home search accordingly.
5. What am I flexible with and what is an absolute deal breaker for me?
“How could anyone live without crown molding?” “Those drop panels in the ceiling are hideous”.“I can’t imagine how anyone can fit into that tiny bathroom”! Are those annoyances that can be fixed or deal-breakers mean a hard pass and unto the next?
Another perk of having a real estate agent with you is that they see so many houses in various stages of repair and updating that they can show you where you can claim another foot or two for bathtub space (and help you figure out how much it will cost and who’s trustworthy enough to take on the job) or let you know that the ceilings are too low for any changes to make much of a difference.
None of these mistakes will keep you from buying a home of your own -- but they could delay the process and cost you hundreds (possibly thousands) of dollars at the end of the day. But if you’re able to avoid them, you’ll be signing the closing papers on your dream home before you know it!
A down payment of just a couple thousand dollars can get you a head start on getting your future home. If you don’t have a certain amount to put down on your home loan, however, you might find yourself paying private mortgage insurance (PMI) for the lifetime of the loan.
Depending on your credit score, the bank, and other factors, PMI could cost between 0.5 percent to 1 percent of the total loan amount.
Most banks require at least a 20 percent down payment before they will waive the need for PMI on the loan. And most homes in this area cost about $300,000, so that means a buyer would need to bring $60,000 to the table in order to avoid PMI.
Some government organizations and lenders try to incentivize first-time homeownership by offering free down payment grants or loans to qualified buyers. Depending on your age, income level, credit score, and other factors, you could qualify for free money to wrap into your down payment; Check out downpaymentresource.com for a full rundown of programs you may qualify for!
Is an 8 a.m. arrival time at work still reasonable with this neighborhood’s commute?
Where are the closest grocery stores, parks, rec centers, and hiking trails?
What are the overnight noise levels? If there’s a train that rolls through town in the early hours of the morning, you’re near a highway or a flight path -- and any of that is going to disturb you -- then it’s best to figure it out before you’re spending your first night in your new home and wake up to unpleasant (and unexpected) noises.
At the very least, you can learn enough about the neighborhood to know how close to (or far away from) the bus line you need or want to be and target your home search accordingly.