First Time Home Buying Tips
If you’re buying a home for the first time, you’ve likely been overwhelmed with advice from friends and family members, all claiming to know the “secrets” to painlessly purchasing your first house. The truth is, when it comes to buying your first home, knowledge is power; the more you know about the process, the more confident you’ll be once you’ve decided on your dream home. To help untangle the intricacies of the real estate market, Vahe offers the following tips to first-time home buyers:
Check Your Credit
For first-time home buyers, an individual’s or couple’s credit score is a major factor in determining if they qualify for a home loan, and home sellers may not seriously consider home buyers that aren’t pre-approved for a loan. Credit scores can be accessed for free at www.AnnualCreditReport.com, and home buyers should scour all three of their credit reports for anything that might hurt their score, like mistakes, unpaid bills, or collection accounts.
Budgeting is extremely important for home buyers–not only will new home owners need to make mortgage payments, they’ll also need to account for utilities, homeowner association dues, taxes, and ongoing repairs. To keep first-time home buyers from getting in over their heads, it’s a good idea to spend a few months tracking one’s cash flow (the money coming in vs the money going out) and construct a budget based on how much is left over each month.
Research Different Types of Loans
Though going through a qualified lender like a bank or mortgage company is the most popular way to receive a home loan, it isn’t the only way. Depending on their home state, qualifying income, applicant’s profession, and a multitude of other factors, first-time home buyers may qualify for loan assistance, debt forgiveness, and no-interest loans through federal grants like the HOME Investment Partnership Program and other affordable housing programs.
Establish Your Debt-To-Income Ratio
In addition to making a detailed budget and establishing a down payment amount, figuring out one’s debt-to-income ratio will help first-time home buyers estimate what size and type of loan they’ll qualify for and keep their search focused on homes they can realistically afford. Though there’s not a fixed debt-to-income ratio that lenders require, most hold to the standard that no more than 28% of one’s gross monthly income be devoted to housing costs.
Organize Your Documents
When applying for mortgages, first-time home buyers must present extensive documents regarding their income, taxes paid, monthly expenses, and debt payments. Typically, lenders will request two recent pay stubs, the previous two years’ W-2s, tax returns, and the past two months of bank statements (including blank pages, too!). Having all one’s paperwork in order can help expedite the home loan process and save time making multiple trips to the bank.
Find The Right Real Estate Agent
Once first-time home buyers have established their budget and been pre-approved for a home loan, soliciting the services of an experienced real estate agent or licensed Realtor can help the individual or couple locate homes that fall within their price range, hire a professional to conduct an inspection of the property, negotiate the price of the home with the seller or broker, complete the necessary paperwork, and offer valuable advice along the way.