5. Save For A Down Payment
With conventional loan down payments going as high as 20%, a down payment can be a big financial step for first-time homebuyers.
If you qualify as a first-time home buyer, you can benefit from several assistance programs that bring the range from 0% for VA loans to 3.5% for FHA loans. These programs provide down payment assistance loans and grants. However, if you have a down payment for at least 20% of the purchase price, you’ll be able to avoid private mortgage insurance (PMI) on a conventional loan.
One of the most important priorities of the FHA is helping home buyers with the purchase of their first home, and this includes assisting borrowers with their down payment. If you qualify as a first-time home buyer, you may have access to state programs, tax breaks and an FHA loan.
According to the U.S. Department of Housing and Urban Development (HUD), a first-time home buyer is any one of the following:
- An individual who’s had no ownership in a principal residence during the 3-year period ending on the date of purchase (This includes a spouse, and if either spouse meets the aforementioned test, they’re considered a first-time home buyer.)
- A single parent who’s only owned a principal residence with a former spouse while married
- An individual who’s a displaced homemaker and has only owned a principal residence with a spouse
- An individual who’s only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations
- An individual who’s only owned a property that wasn’t in compliance with state, local or model building codes and that can’t be brought into compliance for less than the cost of constructing a permanent structure
6. Don’t Forget Closing Costs
Don’t assume your down payment is all you’ll need to close on your mortgage loan. You’ll also need to cover closing costs before taking control of your property.
Closing costs are upfront expenses that go to your lender in exchange for arranging certain loan services. Common closing costs you might see include:
- Attorney fees
- Pest inspection fees
- Appraisal fees
- Escrow fees
- Homeowners insurance
- Title insurance expenses
- Discount points
- Property taxes
You’ll see your exact closing costs on a document called a Closing Disclosure. Generally, you can expect to pay 2% – 5% of your total loan amount in closing costs.
As a first-time buyer, you may qualify for government-backed grants or loans that assist with closing costs. Additionally, it’s fairly common to ask the seller to help cover closing costs. Seller concessions could be a flat percentage of the total closing costs, or the seller could cover specific fees, like appraisal or attorney fees.
7. List Your Needs, Nonnegotiables And Nice-To-Haves
Your reason for buying a home will be your north star for making decisions about your purchase. If your goal is to dip your toe into real estate investment, a duplex may be the perfect option for you.
If you’ve decided to move closer to older parents or a support system as you start a family, consider a condo or townhouse that’ll require less upkeep.
Once you’ve decided on the type of home that’s right for you, you can begin to prioritize which features you want in your home based on your needs.
For example, you might focus on finding a home with extra bedrooms if you plan to have children or need a home office. If pets are the light of your life, a big yard or a location near plenty of green spaces may be nonnegotiable.
Sit down and create a list of qualities you want and need in your new home. This will help you shop for homes more effectively and be less stressed when you compare properties.
8. Work With A Real Estate Agent
Work with a real estate agent (who might also be a REALTOR®) to find the perfect property. Agents and REALTORS® are local professionals who are experts in the home buying process and your local market.
A real estate professional can help by:
- Showing you properties in your area that fit your needs and price range
- Attending showings with you to learn more about your priorities as a homeowner
- Helping you decide how much to offer for a property
- Submitting an offer letter on your behalf
- Helping you negotiate with the seller’s agent after you submit an offer
- Attending the closing with you to make sure everything is in order with your sale
Remember that only a buyer’s agent will work on your behalf. Don’t rely on the seller’s agent to represent your best interests. Always choose a qualified real estate agent to help you buy a home.
