1. Learn about the costs involved in buying a home
When saving for a home, the following costs should be considered:
You will need a down payment based on the type of mortgage and the lender you choose. The down payment on some conventional loans is as little as 3% for first-time buyers with excellent credit ratings. Saving up for that much can be a challenge, however. As an example, a 3% down payment on a $300,000 home equates to $9,000. Make a down payment goal with a down payment calculator, and then set up automatic transfers from checking to savings.
Closing costs, which can range from 2% to 5% of the loan amount, are what you pay to complete your mortgage. Shop around to save on expenses such as home inspections, and you can ask your seller to pay some of your closing costs.
Budget for move-in expenses such as immediate home repairs, upgrades, and furnishings
2. ESTABLISH A GOOD CREDIT HISTORY
Your credit score determines whether or not you qualify for a mortgage and what interest rate you will receive.
To strengthen your credit score, follow these steps:
You can obtain free copies of your credit reports from Experian, Equifax, and TransUnion and dispute any errors that may negatively impact your credit score.
Stay on top of your bills and keep your credit card balances as low as possible.
Maintain your existing credit cards. Closing a credit card will increase your use of available credit, lowering your credit score.
3. OBTAIN A PREAPPROVAL LETTER
You can obtain a mortgage preapproval when a lender offers you a loan of a certain amount and on specific terms.
You have the opportunity to gain an edge over home shoppers who haven’t taken this step yet by having a preapproval letter.
When you’re ready to look for a home, apply for preapproval. To verify your income, assets, and debt, a lender will pull your credit and review your documents.
As long as you apply for preapprovals from more than one lender within a limited time period, such as 30 days, you shouldn’t harm your credit score.
4. LOOK INTO MORTGAGE OPTIONS
There are several types of mortgages available, each with a different down payment and eligibility requirements:
The government does not guarantee conventional mortgages. As little as 3% down is required on some conventional loans for first-time buyers.
The Federal Housing Administration insures FHA loans and allows down payments as low as 3.5%.
The U.S. Department of Agriculture guarantees agricultural loans. They are designed for rural homebuyers and usually do not require a down payment.
The Department of Veterans Affairs guarantees a VA loan. The loans are for military service members and veterans and do not require a down payment.
Furthermore, you have a choice of mortgage terms. The most common type of mortgage used by first-time buyers is the 30-year fixed-rate mortgage, whose interest rate remains the same for 30 years. In general, 15-year loans have a lower interest rate than 30-year mortgages but higher monthly payments.
5. DECIDE ON YOUR PREFERRED TYPE OF HOME & NEIGHBORHOOD
Consider the pros and cons of different types of homes according to your lifestyle and budget.
Be sure to budget for homeowners association fees when applicable.
Research neighborhoods, school districts, and surrounding entertainment if desired.
Another option to consider is buying a fixer-upper – a home that needs repairs or updating. In general, fixer-uppers sell for less per square foot than move-in-ready homes. However, you may have to budget extra for repairs or remodeling. With renovation mortgages, both the home price and the cost of improvements are financed together.
5. choose your real estate agent wisely
The right real estate agent will search the market for homes that meet your needs and assist you in the negotiation and closing process. You should seek out a knowledgeable agent that conveys honesty and integrity.
At The Hepburn-ONeal Group, we’re not in the business of selling homes. We’re in the profession of helping people. Our team treats people and their homes with respect. We know the market. Our real estate professionals advocate without reservation for our clients. In summary, our promise is to listen attentively to our clients’ goals and concerns, and custom-tailor solutions and step-by-step plans for their specific situation.
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The Hepburn-ONeal Group is a team of real estate agents affiliated with Real Broker. Real Broker is a licensed real estate broker and abides by all applicable Equal Housing Opportunity laws. All material presented herein is intended for informational purposes only. Information is compiled from sources deemed reliable but is subject to errors, omissions, changes in price, condition, sale, or withdrawal without notice. No statement is made as to accuracy of any description. All measurements and square footages are approximate. This is not intended to solicit property already listed. Nothing herein shall be construed as legal, accounting or other professional advice outside the realm of real estate brokerage.