Buying your first home can feel both exciting and overwhelming. Looking for a house is plenty of work by itself, but then you need to find the right mortgage too. The entire process involves a great deal of learning and decision-making. Before you jump in headfirst, check out these first-time homebuyer tips to make the process easier.
Check your Credit
Do you know your credit score or the status of your credit history? Ideally, you want to maintain a credit score of around 620 or higher. Remember that the higher your score, the lower the interest rate you will be offered on your mortgage loan, so it’s important to know your number and actively work to keep it high. If you do not have the score you need, there are things you can do to improve your credit. Often, these may be simple fixes that can be solved immediately and reflected on your next re-score. Some examples include paying down credit card balances, fixing any errors on the report, and bringing late payments current. At Streamline, we are experienced at identifying problem areas on your credit report. We strongly suggest speaking with one of our loan originators before paying anything. This is because our system gives us a complete overview of every debt and how each payment will reflect on your credit.
Save for a Down Payment
Owning a home is one of your greatest financial investments, and with that means preparing to put some money down. FHA loans are the most popular option for first-time buyers, requiring 3.5 percent of the purchase price to be used as a down payment on the house. As an example, for an FHA loan on a home that costs $250,000, you would need $8,750 for your down payment.
Separate from your down payment are your closing costs. These consist of title fees, escrow fees, HOA fees, government fees, and more. This is where we can step in to offer our most impactful program to our buyers…the Streamline TriVantage. Using TriVantage, we can offer a credit that helps cover closing costs, leaving cash in your pocket for more important things. In addition, we do not charge origination fees, processing fees, or underwriting fees, saving you thousands of dollars over a typical lender. Contact your local branch today to learn more about Streamline TriVantage.
Know How Much You Can Afford
Before you begin house hunting, first-time homebuyers should start with a pre-approval. This will give you information about how much you can borrow as well as your estimated monthly payment. A pre-approval goes a step beyond a prequalification by looking over your recent pay stubs, tax returns, bank statements, and credit score to make sure you know where you stand. With this information, you can establish financial goals that will keep you within your price range when you begin your search.
Work with a Real Estate Agent
Did you know that real estate agents in a transaction are paid by the seller? It might seem tempting to work on your own, but buyers should take advantage of the knowledge and market expertise of a licensed real estate agent. Matters like inspection reports, repair requests, seller disclosures, contracts, and extensions are not commonly handled by the average homebuyer, but a good agent knows how to navigate all of them. A quality real estate agent will work within your budget, help you negotiate the best deal, and see you through the closing process. If you are currently going through the pre-approval process and you are not working with an agent, our team can provide you with a list of realtors our clients have been happy with in the past to get you started.
Don’t Skip the Home Inspection
Even though it’s another cost, always invest in a home inspection. First and foremost, home inspections should be performed for safety reasons, as they are used to identify problems such as mold, carbon monoxide, radon, etc. Additionally, home inspections reveal what you are potentially stepping into by moving forward with your purchase. Buyers need to have a realistic overview of the condition of the home and what it may end up costing down the road. This is especially important for first-time buyers who are often looking to avoid a home with expensive issues. One thing to note…inspections are so important that you can make your loan contingent on them. In other words, problems in the home inspection are legitimate ways to renegotiate or even cancel your contract if you decide the home isn’t worth the trouble.
Know Your Loan Options
Although FHA loans are the most popular options for first-time buyers, you have a wide range of loan options available. Your credit may be high enough to qualify you for a conventional loan. Or perhaps you are a veteran or active military, making you eligible for a VA loan with no down payment or PMI. Discuss your situation with a Streamline loan originator to find the best loan program for you.
First-time homebuyers have the world at their fingertips. It’s easier than ever today to buy a home with attractive financing options. Do your homework, enlist the help of professionals, and take your time. You will find the home that’s perfect for your family and your finances with these steps.