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First-Time Home Buyers Guide: 9 Tips to Get You Started

First-Time Home Buyers
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For a majority of people, buying a new house is the biggest purchase of their lives. So if you're feeling nervous, it's okay! Most people worry about whether they're going through the process the right way or not.

Here are 9 tips for buying a home: 

  1. Start saving money early.
  2. Consider moving costs.
  3. Plan for maintenance expenses.
  4. Have an emergency fund.
  5. Compare mortgage rate options.
  6. Get your pre-approval letter.
  7. Stick with your home budget.
  8. Get a house inspection.
  9. Don't be afraid to negotiate.

This article will cover all of the tips above in detail. That way, you can feel more confident in your home buying experience. If you want to learn more, be sure to stick around!

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1. Start Saving Money Early

You should start saving money for a house early, as you'll need to make a downpayment on the house. The exact amount will depend on the mortgage and lender. If you have a better credit score, you can get lower percentages for your down payments. 

Nerdwallet recommends that you put down at least 20% on a home since this increases the odds of you getting approved for a reasonable rate. However, you'll need to save quite a lot of money for this.

For example, a $300,000 home would have a down payment of $60,000. Many people prefer to offer 10% instead.

You'll also need to have money to cover closing costs. These are the fees that you pay to finalize the mortgage. The amount usually falls between 2-5% of the mortgage amount.

Saving for a Down Payment

When saving for a down payment, you need to lower your expenses and raise your income. That means knowing where to cut costs. Many people also consider a side gig to help them save more money. 

If you need to get a new place to live sooner rather than later, you should make sure to start this process right away.

And keep in mind, once you move out of your apartment, you won't need to pay rent there any longer. Rent is usually high, so you should be able to use that money towards home payments in the future comfortably. 

This YouTube video covers what you can expect the cost of your down payment to be:

2. Consider Moving Costs

It's costly to move. You'll want to add in several moving expenses. For instance, you may need to rent a truck, pay for movers, get a new ID and registration (if you move to a new state), and more. 

Overall, it's best to save more than you think you’ll need. That way, even if there are surprises down the road, you're still sure to have enough to cover them. You can set money to automatically transfer from your savings to your checking account each week. 

Doing so makes it easier to reach your saving goals without much effort.

Know What You Need

Additionally, it's essential to consider your wants and needs when it comes to buying a home. For instance, you want to move close enough to your job where you can commute comfortably. 

You also want to make sure you have a yard if you wish to have a dog or that you can afford to maintain a pool. Plus, your wants and needs might change every few years. Homes are long-term purchases, so you want to consider everything before making any final agreements.

If you don't know where to start with home-buying, the book How to Buy Your Perfect First Home by Anthony Park, available on Amazon.com, will help you.

In it, Anthony covers how to negotiate a deal with a seller to help you avoid first-time buyer mistakes. It should give you the peace of mind you need when buying a house.

3. Plan for Maintenance Expenses

If this happens to be your first time buying a home, you want to make sure you have enough money to maintain it. As a renter, your landlord would repair appliances and cover the cost for home improvements.

If anything broke, they would fix it for you.

However, with a home, you're responsible for everything. If your gutter breaks, you'll need to be the one to cover costs and hire someone to repair it.

4. Have an Emergency Fund

The best way to cover maintenance is through an emergency fund. It takes a lot of work and dedication to save for emergencies since many financial experts say you want six month's worth of bills covered in your fund. 

That way, you'll have an emergency covered. Down payments are expensive, so you want to make sure that you have the extra money if something unavoidable happens.

For example, an appliance might break right after you move in or you could lose your job.

How to Save for Emergencies

The Consumer Financial Protection Bureau says that you should:

  • Set a dedicated saving goal first. Doing so helps keep you motivated. 
  • Make consistent contributions to your emergency fund. The easiest way to do this is with recurring automatic payments. 
  • Set a higher goal once you reach your current goal.

It's also vital that you continue saving for your down payment and not put more than you can handle into your savings. You want to make sure you still have enough for the necessities you need today!

5. Compare Mortgage Rate Options

Next, you must compare your mortgage options. You'll want to ask for estimates from many different lenders. Then, you can compare the fees they come with and interest rates.

In doing so, you should be able to find the best mortgage option for yourself.

Some lenders offer discounts and ways to lower the initial interest rate. These options are good if you plan on living in the home for a long time. Although, you'll need to have additional money on hand for the mortgage.

6. Get Your Pre-approval Letter

You'll also want to make sure you have a pre-approval letter before you move ahead with buying the house. Having this letter shows sellers that you're serious - it gives you an advantage over other buyers who don't have one. 

You'll want to apply for the letter as soon as you're ready to start shopping around. In other words, once you have a good credit score and substantial savings built up.

The lender will check your credit, assets, and debts before offering the letter.

Applying for more than one pre-approval letter isn't likely to harm your credit score, as long as you apply for the letters within the same month. Waiting too long may cause your credit score to go down slightly.

What You Need for the Pre-Approval Process

If you're planning on getting pre-approved, the lender will want to look at your financial situation. You can make things go more in your favor if you have everything prepared for them.

They'll need to see the following information:

  • Proof of income
  • Proof of assets
  • Debts
  • Your ID
  • Employment information
  • Credit history

You can provide that information through the following documents. You'll want to find them ahead of time and store them together for easier filling.

Here's what you need:

  • W-2 or 1099 statements
  • Bank statements
  • Pay stubs
  • Your license and/or ID card
  • Social Security Number

You'll submit the information to the lender you want to go through. If you have any questions about the loan pre-approval process, you should make sure to ask them. They'll likely get back to you within a handful of business days, usually before a week has passed.

You'll receive a loan estimate. The letter lets you know for what and how much you've been pre-approved. You can show the letter to the seller to let them know you're very serious about buying the house. 

Keep in mind that pre-approval doesn't last forever! You'll want to know the expiration date and try to find a home before it ends. That way, you don't need to go through the process again.

The sooner that you apply, the sooner you can get to work shopping for your new home!

7. Stick With Your Home Budget

If a lender makes an offer outside of your budget, you might feel pressured to go with it. However, doing so would be sure to put more financial strain on you than you're willing to deal with.

You'll want to set your home buying budget, then stick with it.

If you're having trouble choosing a budget, you'll want to talk with a financial advisor. The professional should help you determine what works the best with your current income. That way, you won't struggle to pay your mortgage later on down the line.

Setting a Home Buying Budget

Investopedia suggests that you use the 28% rule. This rule says that your mortgage shouldn't be more than 28% of your total household income for the month- after you pay monthly debts.

This amount allows you to live comfortably in your home without the mortgage being too much to bear.

If you're confident you can pay more, you can set the budget higher. Although, going over 33% (one-third) of your income isn't recommended.

8. Get a House Inspection

Next, it's a good idea to pay for a house inspection. During an inspection, an experienced professional comes to look at the home. They check for potential issues and make it easier to determine which homes are worth buying.

For instance, the pro should look into the home's structures, as well as the mechanics that make it up.

You'll want to be present for the home's inspection. That way, you can ask questions and determine how much the house will cost to repair/remodel. You'll also be able to ask the inspector any questions that you might have.

They're an excellent resource and are very helpful to hire. 

However, it's worth noting that most of these inspections won't check for certain things. If you have specific concerns, you'll want to make sure they can address them. For example, you may want them to test for pests, radon, or mold. 

Also, make sure that you ask about water damage and the quality of the foundation. These elements can have a significant impact on maintenance costs down the road.

Determine if You Even Need One

In some states, home inspections need to take place before you can make an offer. However, in other areas, the assessment happens after you buy the home. You'll want to know the rules for your state, as they'll impact how you shop for homes.

Get a Qualified Inspector

You want to make sure you get a top-notch inspector to investigate the home for you. This professional should be certified since they're a huge factor in whether or not you'll buy the house.

The inspector should be able to answer your questions.

9. Don't Be Afraid to Negotiate

Finally, you'll want to negotiate with the seller. You can ask them to cover the repairs before you move in or lower their asking price so that you can cover the cost for the repairs on your own.

Although your lender might limit what closing costs can be covered, make sure you also know before negotiations start.

You'll want to discuss your options with your real estate agent. They'll know how many buyers want the home, too, allowing you to build a solid plan. Overall, you can always negotiate with the seller, as long as the deal is fair to both of you.

Next Steps

For first-time home buyers, the thought of getting a new mortgage can be very nerve-wracking. However, you're not alone! Many people have gone through this exact process.

Don't hesitate to ask your family and friends about their experience. Your loved ones can support you as you work towards buying your home.

Overall, you'll want to make sure that you have a reliable savings account before you get started on home-buying. Once you have one established, you should have a much easier time preparing the down payment and covering maintenance costs.

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